Class Action Suit Against Silvergate Bank Over FTX Fraud Allegations Moves Forward After Judge’s Ruling
FTX users are suing the now-defunct Silvergate by claiming it abetted FTX and its affiliated trading firm Alameda Research to commit a historic fraud.
According to the customers launching the suit, FTX knowingly transferred customer money into Alameda Research. FTX is currently on trial for numerous offences related to fraud and money laundering charges.
Central to the case is the allegation that FTX illegally wired Alameda Research customer funds to cover the cracks in its balance sheet after the trading company made some risky crypto bets.
On March 20, Judge Ruth Bermudez Montenegro of a San Diego federal court filed an order denying Silvergate’s motion to dismiss the case.
Montenegro ruled that the customers had adequately presented a case for Silvergate knowing and participating in FRX’s fraud in their filing on March 19.
“It was foreseeable that allowing FTX customer funds to be deposited into non-FTX accounts would lead to fraud and harm the owners of those funds,” said the order.
The numbers ostensibly speak for themselves. According to the order, Silvergate’s annual income before taking on FTX as a client was $7.6 million. The bank’s post-FTX income was nearly ten times higher, at $75.5 million, through transaction fees and interest on money deposited in FTX and Alameda accounts.
The court also ruled that Silvergate’s earlier assertion that it doesn’t owe a duty of care to FTX customers is incorrect. Silvergate’s argument rests on the fact that the bank was not directly responsible for the withdrawal freezes that spread panic when FTX began to collapse.
The bank also argued that had it not dealt with FTX, the exchange would have found another bank, an assertion that the judge labeled called “highly speculative”
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