HomeNewsFTX Fraud Allegations: Judge Greenlights Class Action Against Silvergate Bank

FTX Fraud Allegations: Judge Greenlights Class Action Against Silvergate Bank

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  • A federal judge denied Silvergate Bank’s petition to dismiss a class-action case for allegedly assisting FTX fraud.
  • In the midst of crypto banking legal and financial turbulence, the complaint shows Silvergate’s financial motivations and considerable income rise from FTX transactions.

A class-action lawsuit brought by former users of the now-closed cryptocurrency exchange FTX is presently involving Silvergate Bank. According to the lawsuit, Silvergate Bank had a key role in supporting fraudulent schemes connected to FTX and its sister company, Alameda Research, which caused the exchange’s clients to suffer large losses.

Silvergate vs. FTX Customers: A Court Case

On March 20, Judge Ruth Bermudez Montenegro of the federal court in San Diego denied Silvergate Bank’s request to have the complaint dismissed, which marked a significant turn in the case.

So, the judge’s decision supports the plaintiffs’ contention that Silvergate profited financially from FTX’s dishonest tactics while also being aware of them, which negatively impacted the exchange’s user base.

The claim that Silvergate owed the exchange’s clients is at the center of the legal dispute because its Silvergate Exchange Network (SEN) was essential in controlling the flow of money to other cryptocurrency exchanges, including FTX.

The legal processes have revealed Silvergate’s banking relationships with FTX and Alameda Research, specifically regarding transactions that essentially resulted in the misappropriation of consumer monies from FTX to Alameda.

The court has emphasized how much money Silvergate made from continuing to do business with FTX and Alameda; the bank’s income from associated transaction fees and interest increased from an annual $7.6 million prior to FTX’s involvement to an astounding $75.5 million afterward.

Silvergate argued that it had no duty to safeguard the exchange’s clients and that its intervention had no direct bearing on the clients’ financial difficulties. The bank further asserted that FTX would have easily found substitute banking services in its absence. Judge Montenegro, however, rejected these defenses as hypothetical.

Combining Lawsuits and Silvergate’s Dissolution

In April 2023, this February lawsuit was merged with others. This lawsuit follows the exchange’s November 2022 bankruptcy and Silvergate Bank’s March 2023 collapse.

Sam Bankman-Fried’s conviction for fraud and money laundering in November makes the ongoing legal proceedings against Silvergate more serious. His sentencing is scheduled for March 28, as formerly reported by ETHNews.

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Syofri is an active forex and crypto trader who has been diligently writing the latest news related to the digital asset sector for the past six years. He enjoys maintaining a balance between investing, playing music, and observing how the world evolves. Business Email: [email protected] Phone: +49 160 92211628