California Judge Combines Three Lawsuits Against Silvergate 

  • Silvergate Bank is the target of numerous lawsuits due to claims of ties to FTX exchange.
  • The bank was accused of breaking securities rules in a class-action lawsuit
  • Run on Signature Bank was initiated by a sizable number of depositors

Due to claims of strong ties to the FTX exchange, Silvergate Bank is the target of numerous lawsuits. A judge recently merged some of these actions.

According to the combined lawsuit, Silvergate Bank’s provision of banking services allowed FTX to operate as an unregistered money services business, which allowed the bank to make money from unlawful operations. The judge’s action is anticipated to speed up and increase the effectiveness of the legal system.

Three Lawsuits Filed Against SilverGate

The three lawsuits will be merged, United States District Judge Jacqueline Scott Corley of the Northern District of California decided on April 19. Each accuses Silvergate of aiding in the facilitation of FTX, the defunct cryptocurrency exchange, defrauding investors.

The order claims that because the Silvergate cases name common defendants, arise from the same alleged course of conduct, and make use of overlapping justifications for action, they involve common problems of law and fact. Due to the fact that the instances involving Silvergate have these attributes in common, consolidation is reasonable.

Silvergate was the target of the three lawsuits filed by four former investors. They will be joined by consent of the parties but will continue to be distinct from previous federal proceedings against FTX and its founder Sam Bankman-Fried, according to a Law360 article from April 19.

The cases were brought in February by four investors: Sonam Bhatia, Golam Sakline, Matson Magleby, and Nicole Keane.

Four investors charged Silvergate with deliberately aiding FTX’s alleged wrongdoing, including executing dubious customer funds transfers to its sibling trading firm, Alameda Research, in the documents.

Consolidating The Case, A Logical Move?

The California judge observed in the decision pertaining to the cases that pooling these claims is the only sensible course of action because the lawsuits have similar legal and factual issues.

The order stated that “The Silvergate cases are appropriate for consolidation” because they 

involve common questions of law and fact, arise from the same alleged course of conduct, and assert overlapping causes of action.

It’s important to note that these claims will not be consolidated with other federal actions brought against FTX and Sam Bankman-Fried, the company’s co-founder. In October, the brains behind FTX are expected to testify in court.

Early in March, Silvergate planned to “voluntarily liquidate” its assets and close its doors. To make matters worse, the bank was accused of breaking securities rules in a class-action lawsuit in January.

The bankruptcy filing of FTX in November of last year, which precipitated a severe market drop and liquidity problems for Silvergate, was the root of the issue.

Why Did Signature Bank Collapse?

In a related event, the financial watchdog for New York state claims that the run on Signature Bank was initiated by a sizable number of depositors from a variety of industries, not by cryptocurrency.

Federal authorities seized crypto-friendly Signature Bank in March.

It is a misunderstanding that the failure of Signature Bank was tied to cryptocurrencies, according to Adrienne Harris, superintendent of the New York State Department of Financial Services (NYDFS), who was speaking at a hearing on stablecoins on April 18 in the House Financial Services Committee.

She claimed that depositors such as wholesale food sellers, fiduciaries, trust accounts, and legal companies abandoned the bank and started the run, according to a report from April 19.



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