DOJ’s fraud unit is investigating Sivergate’s dealings with FTX and other Sam Bankman-Fried firms.
The United States Department of Justice (DOJ), a federal executive department of the United States government tasked with the enforcement of federal law, has reportedly launched an investigation into crypto bank Silvergate.
According to the Bloomberg report shared on February 2nd, the prosecutors in the fraud unit are looking into Silvergate’s dealings with crypto exchange FTX and crypto trading firm Alameda Research.
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In particular, the DOJ is looking into Silvergate’s accounts linked to firms of FTX co-founder and former chief executive officer Sam Bankman-Fried. The probe was allegedly revealed by “people familiar with the matter.”
It is worth noting that, so far, the DOJ hasn’t blamed Silvergate of any wrongdoings but believes that the company may have failed to properly monitor customer accounts. Based on some reports, Silvergate allegedly allowed customers to transfer hundreds of thousands of dollars without proper oversight or monitoring.
The US DOJ is reportedly looking into whether FTX, Alameda Research, or other affiliated companies used the breach in Silvergate’s system to launder their funds.
Earlier, Silvergate revealed that Alameda Research opened an account in the bank in 2018. The company informed that, at that time, it conducted due diligence and constantly monitored the firm.
The crypto bank was heavily affected by the collapse of FTX and 130 related firms. Silvergate has reportedly lost around $1 billion in the fourth quarter of 2022. Nevertheless, the company allegedly took billions of dollars of loans to prevent a liquidity crisis.
After the news broke about the DOJ’s probe into Silvergate, the crypto bank’s stock price fell by 28% in after-hours trading to $15.06. At the time of writing, Silvergate’s stock is worth $18.25.