Silvergate’s ties to FTX face renewed scrutiny from senators

A number of U.S. senators are looking for new particulars from Silvergate Capital about its information of FTX’s wrongdoing, in response to a Jan. 31 report from Bloomberg.

The senators answerable for the inquiry embody famous cryptocurrency critic Elizabeth Warren (D-Mass.) in addition to Roger Marshall (R-Kan.) and John Kennedy (R-La.)

In accordance with a letter obtained by Bloomberg, senators asserted that Silvergate didn’t completely reply their earlier questions and mentioned that considerations round confidentiality are “not a suitable rationale” for the financial institution’s failure to reveal info. They added that Congress and the general public are owed details about Silvergate’s position within the FTX collapse.

The group of senators moreover requested Silvergate to reveal whether or not it was conscious that FTX instructed customers to wire funds to Alameda’s account at Silvergate — an occasion of fund mismanagement that was first reported last November. The senators additionally requested Silvergate whether or not it flagged any suspicious transactions. Moreover, they requested Silvergate about its due diligence course of and the outcomes of exterior evaluations and audits.

Elsewhere within the letter, the senators famous that Silvergate obtained a $4.3 billion loan from the Federal Residence Mortgage Financial institution — a government-sponsored banking system — following FTX’s collapse in late 2022. They added that Silvergate relied upon the financial institution as a lender of final resort. The group of senators requested Silvergate the way it plans to make use of that mortgage.

The identical senators beforehand demanded solutions from Silvergate in a similar letter in December. Although Silvergate cited confidentiality guidelines at the moment, it did reveal that its relationship with Alameda Analysis predated FTX’s founding. It additionally mentioned that it was reviewing transactions associated to each companies. The financial institution added that it conducts due diligence on its purchasers, reiterating a statement made to the public earlier that month.

Silvergate has till Feb. 13 to answer the newest spherical of questions. It’s unclear what steps shall be taken if it doesn’t reply, although Bloomberg’s report means that senators may undergo banking regulators to acquire the requested info.