In happier times, Silbert provided Silvergate with introductions to other crypto players that helped transform it from a sleepy local bank that had managed to avoid the 2008 housing crisis into something of a casino dealer for the crypto ecosystem. DCG was also the lead investor in a $114 million Silvergate private placement ahead of the bank’s IPO in 2019.
The easy trading fostered by SEN helped enable the 2021 crypto boom: Silvergate’s customers could even borrow from the bank against their bitcoin holdings to buy more crypto in its internal network. As of July, the bank said more than 20 percent of its loans were made through this program. A week before Bankman-Fried was arrested in the Bahamas, Senator Warren, along with Republican colleagues John Kennedy and Roger Marshall, asked pointed questions of CEO Lane about the bank’s handling of what are now alleged to be illegal transactions conducted by Alameda Research and FTX. The three wrote a letter to Lane noting the “bank’s failure to report these suspicious transactions.”
The critics aren’t buying Lane’s defenses. Cohodes says that “if Silvergate’s SEN network were operated properly, which it is not, none of this stuff” — meaning those Alameda, North Dimension, and FTX transactions — “would have passed the smell test.” Meanwhile, both Silvergate’s chief anti-money-laundering and sanctions officer and its co-founder have quietly left the bank.
then be taken out of the bank. Cohodes says the system is ideal for criminals looking to disguise the origin of money they’re trying to launder: “No one would be the wiser.” “That’s definitely shots fired across the bow” of Silvergate, says David Dorr, the chief investment officer of macro-trading firm Dorr Asset Management.
mcelarier Excellent reporting. Seems like these players want all the rewards & zero risk. They create nifty titled companies to sound legit & use bs language to get investors onboard to hide money laundering & then bail. U.S. taxpayers better not be on the hook via FDIC for this. Unfair.