US Senator Stated Silvergate Introduces Crypto Risk ‘Further Into’ Traditional Banking System
- Silvergate claimed that consumers removed $8.1 billion in crypto deposits, something observers have described “worse than historic depression-era runs in Q4 2022.
- The letter closes with a detailed questionnaire designed to learn more about the link between FTX, Alameda Research, and Silvergate.
According to a new letter from U.S. senators including Elizabeth Warren, Silvergate’s relationships with FTX and Alameda need greater scrutiny.
Based on a new letter U.S. Senators Elizabeth Warren (D-Mass. ), John Kennedy (R-La. ), and Roger Marshall (R-Kan.) responded to Silvergate CEO Alan Lane’s letter, stating that crypto bank’s transactions with FTX and Alameda required closer scrutiny and requesting more information from this bank.
The agreement between Silvergate and the FTX exchange “further integrates crypto market risk into the regular banking system.” The letter was followed by an elaborate questionnaire designed to elicit further information about the link between FTX, Alameda Research, and this bank.
Silvergate revealed in Q4 2022 that consumers had withdrew $8.1 billion in crypto deposits, which analysts have described as worse than historic depression-era runs. Because of the bank’s strong links to the now-defunct FTX, this wave of withdrawals was most likely caused by frightened investors looking to protect their money from the continued contagion. The bank sold around $5.2 billion in debt instruments and received a $4.3 billion loan from the Federal Home Loan Bank (FHLB) to shore up its accounts, according to the same quarterly report.
The crypto bank is anticipated to answer no later than February 13th. The first, which the senators described as “evasive and incomplete,” arrived on December 5, 2022, and demanded the crypto bank to divulge its precise relationship with FTX, citing Silvergate’s suspected participation in shifting FTX customer assets to its sibling trading business Alameda Research.
On the same day, the bank CEO Alan Lane issued a public statement condemning “speculation” and “misinformation” about his company’s health, asserting that Silvergate had done “substantial” due diligence on the two companies.
Silvergate’s links to the high-profile fall of Sam Bankman-enterprise Fried’s are being investigated by more than just lawmakers. On December 16, a class-action lawsuit was filed alleging that the bank assisted and enabled FTX’s alleged fraudulent conduct. Silvergate, according to the complaint, participated in “first-hand participation in the commingling of monies, unlawful transfers, and lending out of client money.”
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