Several events are still unfolding following the collapse of FTX crypto exchange. The contagion from the exchange’s sudden collapse created panic among other crypto companies, especially those with exposure to the Sam Bankman-fried led exchange. Also, the shutdown of its sister company, Alameda Research, only added to the paranoia.
Silvergate Capital is one of the companies that is now in hot water, including Silvergate Bank and Silvergate Capital CEO Alan Lane, who are all facing a class-action suit for their connection with FTX.
Silvergate Capital is California-based Silvergate Bank’s parent company. The lawsuit was filed in the California Southern District Court.
FTX founder and former CEO Sam-Bankman-Fried l Image Source: Reuters
Silvergate Aided Fraudulent Actions Of FTX, Lawsuit Claims
The case accuses Silvergate for keeping FTX users’ deposits in Alameda’s bank accounts. Joewy Gonzalez was the plaintiff to file the lawsuit on behalf of others involved in the situation. Based on the charge documents, Gonzales invested his savings in digital assets in FTX.
FTX assured investors of a high return on investment with a secured storage system. Also, they were promised the opportunity to cash out their assets anytime or trade them for other tokens.
FTX customers and investors are waiting to hear about the missing funds amounting to around $2 billion in total, Reuters reported.
The suit cited that Silvergate aided and abetted the fraudulent actions of FTX. This resulted in the exchange breaching fiduciary duties using improper transfers, lending customers funds, and comingling funds.
The lawsuit also stated that FTX must refund the plaintiff and the other investors. Representing Gonzales in the case are lawyers Girard Sharp and Hartley LLP. The counsel for the defendants is yet to be named.
US Senators Want To Know More
U.S. senators queried Silvergate on its involvement with the disgraced crypto firm. In a letter written on December 6, the lawmakers asked Silvergate to explain where the customer funds went.
Senators Elizabeth Warren, Roger Marshall, and John Kennedy demanded that Lane disclose all information about the company’s connection with FTX.
Crypto market stands at $768 billion | Source: Crypto Total Market Cap on TradingView.comMeanwhile, FTX lawyers have requested permission to sell off other subsidiaries of the crypto exchange. These include FTX Japan, FTX Europe, LedgerX, its derivatives exchange, and Embed, a stock-clearing platform.
The lawyers explained that the values of these companies’ assets face risks due to the regulatory pressure on the firms. Hence, they will be more profitable when sold.