• US senators are demanding answers from Silvergate Capital Corp. regarding its ties to the now-defunct FTX exchange.
• The senators want to know if Silvergate knew about the exchange’s misuse of customer funds.
• Silvergate has been given a deadline of February 13 to respond to the senators’ inquiries.
US Senators are demanding answers from Silvergate Capital Corp. over the now-defunct FTX exchange’s alleged misuse of customer funds. In a letter sent to Silvergate’s Chief Executive Officer Alan Lane by Senators from both sides of the aisle, including Elizabeth Warren and Republicans Roger Marshall and John Kennedy, the senators argued that Silvergate’s responses to a previous inquiry over its ties to FTX were “evasive and incomplete.”
The senators demanded to know if Silvergate knew about FTX’s misuse of customer funds. In particular, they asked if the parent company of crypto-focused Silvergate Bank was aware of FTX directing customers to wire funds to Alameda’s account at Silvergate, if any transactions were flagged as suspicious, and for details on the firm’s due diligence procedures. In early January, Silvergate said that it held $4.3 billion in short-term Federal Home Loan Bank advances and had $4.6 billion cash and cash equivalents at the end of 2022 – both of which were put towards preventing a run on deposits following FTX’s collapse.
The senators gave Silvergate until February 13 to respond to their inquiries. They argued that, “Congress and the public need and deserve the information necessary to understand Silvergate’s role in FTX’s fraudulent collapse.” The senators’ letter brought to light the need for transparency in the crypto-space, and the importance of due diligence when it comes to customer funds.
Silvergate’s response to the senators’ inquiry will be closely watched by regulators, investors, and customers alike. Failure to provide the requested information could result in further investigations and possible legal action against the company. It will also set a precedent for other crypto-related companies and exchanges, who will be held to a higher standard when it comes to the handling of customer funds.