According to allegations, the company and its executives knowingly misled investors with positive statements despite accusations involving money laundering and tanking share prices.
A class-action suit was filed against Silvergate Capital, operator of the Silvergate Exchange Network and parent company of Silvergate Bank, in United States District Court of Southern California on Jan. 10. The suit was filed on the behalf of all purchasers of Silvergate securities between November 9, 2021, and January 5, 2023, claiming violations of the Securities Exchange Act of 1934.
Silvergate CEO Alan Lane and chief financial officer Antonio Martino were also listed as defendant in the suit. The plaintiff claimed in the suit that Silvergate’s platform failed to detect occurrences of money laundering “in amounts exceeding $425 million,” for which the company was likely to face regulatory repercussions. The legal papers allege:
“Defendant’s positive statements about the Company’s business, operations, and prospects were materially misleading and/or lacked a reasonable basis. […] As a result of these materially false and/or misleading statements, and/or failures to disclose, Silvergate’s securities traded at artificially inflated prices during the Class Period.”
Furthermore, “Defendants knew that the public documents and statements issued or disseminated in the name of the Company were materially false and/or misleading.”
The claim that the company was involved in the transfer of $425 million to “South American money launderers” is based on a Nov. 15 tweet by Marcus Aurelius Research. That tweet and the Bear Cave newsletter issue of Nov. 17 that mentioned the same issue allegedly contributed to a significant fall in the Silvergate share price. After a Silvergate press release revealed that digital asset deposits at the bank had decreased 68% in the last quarter of 2022, from $11.9 billion to $3.8 billion, the share price declined further.
$SI Recently subpoenaed Silvergate bank records reveal $425 million in transfers from $SI crypto bank accounts to South American money launderers. Affadavit from investigation into crypto crime ring linked to smugglers/drug traffickers (we are short):https://t.co/8Cyz5QiXei pic.twitter.com/qa2IaeKFGa
— AV (@AureliusValue) November 15, 2022
Silvergate shares are traded on the New York Stock Exchange, and the suit claims the class members could include “at least hundreds or thousands,” whose identities have yet to be uncovered.
Related: Silvergate Bank revenue soars in Q1 as institutional crypto trading activity falls
Silvergate has been under increasing pressure in recent months. A class-action suit was filed against Silvergate on Dec. 14 over its alleged role in transferring FTX user funds to Alameda Research. Its difficulties covering the run of withdrawals it experienced forced it to lay off employees and sell assets at a loss, it was revealed earlier in January.
Crypto-friendly bank Silvergate received $4.3B loan from the Federal Home Loan Bank to stave off a bank run. US taxpayers are now officially subsidizing crypto fraud/grift in the first US crypto-bailout, all done in plain view. So this is how liberty dies.https://t.co/G4VKSsLV7w
— John Reed Stark (@JohnReedStark) January 11, 2023
