Silvergate Investigated by US DoJ Over FTX and Alameda

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Silvergate Capital Corp. (NYSE: SI) is reportedly under investigation by the United States Department of Justice (DoJ) fraud unit for its dealings with the bankrupt FTX and Alameda firms. According to a report by Bloomberg, the United States prosecutors are examining Silvergate’s hosting of accounts tied to former FTX boss SBF’s businesses. However, the crypto-friendly bank has not been accused of any wrongdoing as the inquiries are in the early stages of investigations.

Reportedly, people familiar with the matter confirmed that the investigation on Silvergate began weeks ago as the prosecutors try to understand the year-long FTX fraud scheme. Furthermore, over $8 billion is reportedly missing from the FTX balance sheet, which is reportedly misappropriated by Alameda.

US prosecutors in the DOJ’s fraud unit are looking into crypto-friendly bank Silvergate Capital Corp.’s dealings with FTX and Alameda Research about criminal investigation. Silvergate eported a $1 billion loss last quarter and fired 40% of its staff. https://t.co/VLtRcMupLn

— Wu Blockchain (@WuBlockchain) February 3, 2023

Bigger Picture of Silvergate Investigations

Following the report by Bloomberg, Silvergate shares experienced heightened volatility on Thursday. According to market data provided by MarketWatch, Silvergate shares closed Thursday trading at $20.97, up 29.13 percent.

However, the SI shares dropped as much as 18.26 percent during the after-hours. The $514.14 valued company has previously indicated that it is well equipped to deal with crypto volatility despite the prolonged bear market.

In a prior announcement, the bank announced that it had minimal exposure to the FTX through Genesis. Notably, DCG’s Genesis Trading recently filed for chapter 11 bankruptcy protection following huge exposure to FTX and Three Arrows Capital (3AC).

“Silvergate’s deposit relationship with Genesis was less than $2.5 million as of both December 31, 2022, and January 19, 2023. Genesis is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans and Silvergate has no outstanding loans to nor investments in Genesis,” the company noted.

Meanwhile, the company continues to operate normally despite the crypto drawbacks.

Despite the recently reported 70% drawdown in digital asset client deposits at Silvergate, NYDIG remains supportive of their business, adding deposits and continuing to utilized their SEN product.

— NYDIG (@NYDIG) January 18, 2023