A class action lawsuit has been issued against Silvergate Bank, Silvergate Capital Corporation, and Silvergate CEO Alan Lane. The lawsuit, which concerns accounts held by troubled crypto companies FTX and Alameda Research, was filed at the California Southern District Court.
The suit is set to hold Silvergate accountable for its alleged roles in transferring FTX user deposits to Alameda bank accounts, leading to panic in the crypto market and is one of the factors which caused both FTX and Alameda to declare bankruptcy.
According to the suit filed by the plaintiff, Joewy Gonzalez, on behalf of himself and others in the same predicament due to the FTX and Alameda saga, the plaintiff invested his savings in crypto through the FTX exchange. He cited the exchange’s promise of users being able to “ store assets securely as they gained in value, cash them out or trade them with other assets.”
The suit alleges Silvergate’s involvement in the FTX fraudulent transfer of users’ funds, claiming the Crypto bank aided and abetted FTX’s fraudulent activities and the exchanges’ breach of fiduciary duty through improper transfers, over-leveraging users’ funds.
According to the lawsuit, Silvergate is liable for its role in “furthering FTX’s investment fraud” and has an obligation to return what they owe to the plaintiff and other investors. The Plaintiff is represented in the legal proceedings by Girard Sharp and Hartley LLP.
On Dec 6, three United States senators wrote a letter to Silvergate and demanded answers concerning the firm’s role in the loss of billions of dollars during the FTX collapse. Senators Elizabeth Warren, John Kennedy, and Roger Marshall asked Lane to provide details on the firm’s relationship with FTX.
As this went on, FTX lawyers recently requested permission to sell off FTX Europe, FTX Japan, its derivatives exchange LedgerX. and Embed a stock-clearing platform. According to the lawyers, since the businesses are under regulatory pressure, the value of the assets is at risk, and this merits an “expeditious sale process.”