SEC Charges Silvergate Capital and Executives with Misleading Investors

Posted on August 1st, 2024 at 11:59 AM
SEC Charges Silvergate Capital and Executives with Misleading Investors

From the desk of Jim Eccleston at Eccleston Law

The Securities and Exchange Commission (SEC) has filed a complaint against Silvergate Capital Corporation and three former executives, alleging they misled investors about the strength of Silvergate Bank’s Bank Secrecy Act/Anti-Money Laundering compliance program and the monitoring of crypto customers, including the collapsed FTX.

InvestmentNews reports that Silvergate's automated system failed to monitor nearly $1 trillion in transactions on its payments platform, the Silvergate Exchange Network. Despite this failure, former CEO Alan Lane and former Chief Risk Officer Kathleen Fraher assured investors of the system's robustness, even amid concerns about FTX's use of Silvergate accounts in its misconduct.

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, stated, “At all times, but especially during moments of crises, public companies and their officers must speak truthfully to the investing public. Here, we allege that Silvergate, Lane, and Fraher fell not only woefully, but also fraudulently, short in that regard.” Due to these deficiencies, Silvergate allegedly failed to detect nearly $9 billion in suspicious transfers among FTX and related entities, causing Silvergate’s stock to plummet and wiping out billions in market value for investors.

Silvergate, Lane, and Fraher agreed to settle the SEC’s complaint without admitting or denying the allegations. Silvergate will pay a $50 million civil penalty and faces a permanent injunction. Lane and Fraher agreed to permanent injunctions, five-year officer-and-director bars, and civil penalties of $1 million and $250,000, respectively. These settlements are subject to court approval.

The SEC also alleges that former Chief Financial Officer Antonio Martino misled investors about the company’s losses from expected securities sales following FTX’s collapse. According to the SEC, Martino and Silvergate understated losses and misrepresented the company’s capitalization status as of December 31, 2022. Subsequently, Silvergate announced the winding down of its banking operations, leading to a dramatic fall in its stock value.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, sec

Return to Archive

TESTIMONIALS

Previous
Next

I am so blessed to have you and your dynamic team defending me. Your ethics, forward thinking and strategies are amazing.  You guys are the best group of attorneys in the country that I could hire to handle this complicated case.

Cindy C.

LATEST NEWS AND ARTICLES

February 26, 2026
FINRA Bars Former Cambridge Advisor After Refusal to Cooperate With Communications Probe

A former advisor affiliated with Cambridge Investment Research has been barred from the securities industry after declining to comply with a regulatory investigation, according to the Financial Industry Regulatory Authority (FINRA).

February 25, 2026
Advisors Increase Crypto Allocations as Merrill Lynch Warns of Significant Risks

Financial advisors are placing more client assets into digital currencies, even as major firms caution investors about the asset class's volatility and speculative nature.

February 24, 2026
Merrill Lynch Highlights AI Risks as FINRA Urges Greater Oversight of Emerging Technology

Merrill Lynch has warned that the expanded use of artificial intelligence and machine learning introduces material operational, compliance, and cybersecurity risks for advisory firms.