Silvergate’s ties to FTX face renewed scrutiny from senators

Several U.S. senators are seeking new details from Silvergate Capital about its knowledge of FTX’s wrongdoing, according to a Jan. 31 report from Bloomberg.

The senators responsible for the inquiry include noted cryptocurrency critic Elizabeth Warren (D-Mass.) as well as Roger Marshall (R-Kan.) and John Kennedy (R-La.)

According to a letter obtained by Bloomberg, senators asserted that Silvergate did not thoroughly answer their previous questions and said that concerns around confidentiality are “not an acceptable rationale” for the bank’s failure to disclose information. They added that Congress and the public are owed information about Silvergate’s role in the FTX collapse.

The group of senators additionally asked Silvergate to disclose whether it was aware that FTX instructed users to wire funds to Alameda’s account at Silvergate — an instance of fund mismanagement that was first reported last November. The senators also asked Silvergate whether it flagged any suspicious transactions. Furthermore, they asked Silvergate about its due diligence process and the results of external reviews and audits.

Elsewhere in the letter, the senators noted that Silvergate obtained a $4.3 billion loan from the Federal Home Loan Bank — a government-sponsored banking system — following FTX’s collapse in late 2022. They added that Silvergate relied upon the bank as a lender of last resort. The group of senators asked Silvergate how it plans to use that loan.

The same senators previously demanded answers from Silvergate in a similar letter in December. Though Silvergate cited confidentiality rules at that time, it did reveal that its relationship with Alameda Research predated FTX’s founding. It also said that it was reviewing transactions related to both firms. The bank added that it conducts due diligence on its clients, reiterating a statement made to the public earlier that month.

Silvergate has until Feb. 13 to respond to the latest round of questions. It is unclear what steps will be taken if it does not respond, though Bloomberg’s report suggests that senators could go through banking regulators to obtain the requested information.