United States-based cryptocurrency bank Silvergate is facing a class action lawsuit for its role in the demise of Sam Bankman-Fried’s crypto empire FTX and Alameda Research.

FTX Investor Sues Silvergate Bank

The lawsuit was filed at the United States District Court for the Southern District of California by Joewy Gonzalez on behalf of himself and other affected persons.

The plaintiff accuses Silvergate of transferring customer funds from FTX’s accounts to those of Alameda, improper moves that eventually helped drive both firms into bankruptcy.

“Silvergate, a publicly traded and federally regulated bank catering to cryptocurrency customers, maintained both FTX and Alameda accounts. It directly aided and abetted FTX’s fraud and breaches of fiduciary duty via first-hand participation in the commingling of funds, improper transfers, and lending out of customer money,” the document reads.

Gonzalez disclosed that he invested his savings in crypto through FTX, and with the firm now bankrupt, he cannot recover them. He alleges that Silvergate and its CEO Alan Lane knew about FTX’s fraudulent scheme but refused to speak up because they benefited from those acts.

The complaint claims Silvergate violated its responsibilities under the Bank Secrecy Act (BSA), which required it to actively monitor and report any suspicious behaviour while ending business with the perpetrators of such acts.

Silvergate’s Lack of Disclosure Led to Investors’ Losses

Furthermore, the lawsuit alleges that the accused breached their know-your-customer (KYC) and anti-money laundering (AML) duties in their relationship with FTX and Alameda. The plaintiff insists that the defendants either failed to establish a due diligence program or did not properly execute the program.

“Though aware of the illegal FTX/Alameda scheme and its injurious effects, Defendants did not take any action to stop or report it, but instead continued accepting the deposits and executing the transfer and lending transactions upon which the scheme relied.”

Gonzalez also alleges that Silvergate’s lack of disclosure was the cause of investment losses for FTX users. He claims Silvergate, Lane, and FTX founder Sam Bankman-Fried (SBF) had “mutual knowledge of each other’s wrongdoing.”

~ By William A. Frederick ~