Judge Consolidates Multiple Lawsuits Alleging FTX Ties with Silvergate Bank for Efficient Proceedings

Plaintiffs Join Forces to Seek Damages from Silvergate’s Collapse

Investors who suffered losses due to the collapse of Silvergate Bank have consolidated their lawsuits against the defunct crypto bank. The lawsuits involve bankrupt crypto exchange FTX, which is accused of fraud by the plaintiffs. California judge Jacqueline Scott Corley of the Northern District of California combined the three lawsuits on April 19, citing common questions of law and fact, common defendants, and overlapping causes of action. The lawsuits were brought against Silvergate by four former investors: Matson Magleby, Golam Sakline, Nicole Keane, and Sonam Bhatia.

Silvergate’s Alleged Role in FTX’s Misconduct

The plaintiffs allege that Silvergate helped FTX facilitate investor fraud by processing illegitimate transfers of FTX customer funds to its sister trading firm, Alameda Research. Silvergate’s disclosure of plans to liquidate assets and shut down operations came after a bank run in early March. Additionally, the bank was hit with a class-action suit in January for securities law violations. FTX filed for bankruptcy in November 2022, which created liquidity problems for Silvergate.

The consolidation of the lawsuits against Silvergate Bank by the plaintiffs seeks to hold the defunct crypto bank accountable for its alleged role in facilitating fraud by FTX. It also highlights the growing concerns about the lack of regulation in the crypto industry. The industry has witnessed several instances of fraudulent activities, causing significant losses to investors. The ongoing scrutiny of the crypto industry calls for regulatory oversight to protect investors from such fraudulent activities.

New York Regulator Dismisses Link Between Signature Bank’s Collapse and Crypto

In a related development, New York State’s financial regulator dismissed claims that the collapse of Signature Bank was caused by crypto. Crypto-friendly Signature Bank was seized by federal regulators in March. In a House Financial Services Committee hearing on stablecoins on April 18, New York State Department of Financial Services (NYDFS) Superintendent Adrienne Harris said “it is a misnomer that the failure of Signature Bank was related to crypto.” She attributed the bank’s collapse to a run by depositors from a broad base of business sectors, including wholesale food vendors, fiduciaries, trust accounts, and law firms.

The dismissal of claims linking Signature Bank’s collapse to crypto is significant as it shows that not all bank failures are related to crypto. It highlights the need to understand the root causes of such failures before making any conclusions. Furthermore, it emphasizes the importance of regulatory oversight to prevent fraudulent activities and maintain the stability of the financial system.

Conclusion

The consolidation of the lawsuits against Silvergate Bank by the plaintiffs seeks to hold the defunct crypto bank accountable for its alleged role in facilitating fraud by FTX. It also highlights the need for regulatory oversight to prevent fraudulent activities in the crypto industry. Meanwhile, the dismissal of claims linking Signature Bank’s collapse to crypto emphasizes the importance of understanding the root causes of bank failures and the need for regulatory oversight to maintain the stability of the financial system.