US legislators asks Silvergate about connections to FTX

Key points: 

• Three members of the U.S. Senate sent a letter to Silvergate Bank demanding answers regarding the bank’s role in the FTX debacle.
• Reports suggest that Silvergate facilitated the transfer of FTX customer funds to Alameda.
• Silvergate has conducted significant due diligence on FTX and its related entities including Alameda Research, as part of its onboarding process, among other processes, the CEO explains.

Three members of the U.S. Senate sent a letter to Silvergate Bank demanding answers regarding the bank’s role in the FTX debacle that caused billions of dollars in customer losses.

According to a Dec. 6 NBC News report, Senators Elizabeth Warren, John F. Kennedy, and Roger Marshall sent a letter to Silvergate CEO Alan Lane asking the bank to release details of its relationship with FTX Corp. in response to “new and disturbing allegations" about its business practices.

“Your bank’s involvement in the transfer of FTX customer funds to Alameda reveals what appears to be an egregious failure of your bank’s responsibility to monitor for and report suspicious financial activity carried out by its clients,” the lawmaker reportedly wrote.

We are concerned about Silvergate’s role in these activities because of reports suggesting that Silvergate facilitated the transfer of FTX customer funds to Alameda

The letter was sent to Silvergate, which had until December 19 to send a reply. Warren reportedly said Silvergate was "at the center of the improper transfer of billions in FTX customer funds" and called for accountability. This is in line with the senator's request in November that the Justice Department may prosecute those involved in the collapse of FTX.

Lane published an open letter on Dec. 5 — presumably before the RFI — in which he criticized “short sellers and other opportunists seeking to exploit market uncertainty” for speculation and misinformation. Silvergate has "conducted significant due diligence on FTX and its related entities including Alameda Research," as part of its onboarding process, among other processes, the CEO said. NBC News reported that Lane called the bank a "victim" of FTX and Alameda Research's “apparent misuse of customer assets and other lapses of judgment.” 

Members of Congress have scheduled investigative hearings to look into the sinking of the SBF and what possible legislative or regulatory solutions, if any, could be in place to prevent similar incidents in the future. House Financial Services Committee leadership has urged Bankman-Fried to testify remotely or in person at the Dec. 13 hearing, but the FTX CEO said he will wait until he has “finished studying and reviewing what has happened.”