Silvergate Bank, headquartered in the United States, primarily serves cryptocurrency companies. One of its clients was FTX, for which it facilitated fiat currency exchanges and deposits. Users who utilized FTX’s over-the-counter (OTC) trading services revealed that when remitting funds to FTX, the payments were actually directed to Alameda. SBF had consistently emphasized that FTX and Alameda were two independent companies, so in theory, Silvergate should not have allowed Alameda to receive funds on behalf of FTX. This may have violated anti-money laundering regulations.
The cryptocurrency trading market operates 24 hours a day. Exchanges need to support 24/7 cryptocurrency trading, and ideally, the underlying fiat currency conversions should also settle 24/7. However, traditional banks that handle fiat currencies generally operate from 9 to 5 and close on holidays. Silvergate positioned itself as a crypto-friendly bank by building a real-time payment system called the Silvergate Exchange Network (SEN), which processes fiat currency deposits, withdrawals, and conversions around the clock. This made Silvergate a preferred partner for many cryptocurrency companies, especially exchanges. In addition to FTX, Silvergate’s clients included many well-known large exchanges such as Coinbase, Kraken, and Crypto.com, as well as Circle and Paxos, the issuers of USDC and BUSD. Silvergate primarily serves cryptocurrency companies. Besides FTX, its clients include many prominent exchanges, such as Coinbase, Kraken, and Crypto.com. After FTX filed for bankruptcy protection, users began scrutinizing the fund flows between FTX and its partners. One user pointed out on Twitter that when using FTX’s OTC services, they were instructed to remit funds to “Alameda Research LTD,” and the remittance records showed that Silvergate Bank was the processing bank. Other users echoed similar experiences. From the time FTX faced liquidity concerns until its bankruptcy, SBF, the founder of FTX, repeatedly insisted that no funds had been misappropriated between FTX and Alameda. Although bankruptcy filings later revealed otherwise, the handling of fiat remittances before the collapse had already hinted at problems. Silvergate cannot be absolved of responsibility in this matter.A Twitter user pointed out that when using FTX’s over-the-counter (OTC) trading services in the past, clients were instructed to remit funds to “Alameda Research LTD.”
If Alameda were a subsidiary of FTX handling these payments on its behalf, the situation might be different. However, based on available information—including the investigative report submitted to the court by FTX’s new CEO, John Ray, and statements from SBF himself—FTX and Alameda operated as two independent companies in terms of corporate structure. Therefore, Alameda should not have been receiving deposits from FTX clients, yet Silvergate permitted such transactions. It is important to note that Silvergate, as a licensed bank and publicly listed company in the United States, is required to strictly comply with anti-money laundering (AML) regulations, including Know Your Customer (KYC) requirements. Given Silvergate’s role in facilitating fund transfers and settlements, this alone is sufficient grounds for relevant government agencies to conduct an in-depth investigation. If the operation—where clients believed they were remitting funds to Party A, but Silvergate delivered the funds to Party B—is confirmed, it would clearly constitute a violation of anti-money laundering regulations. Beyond the AML compliance issues, as the bank holding FTX’s fiat deposits, there are also concerns about whether Silvergate might face liquidity problems as a result of the bankruptcy. In fact, on the same day FTX filed for bankruptcy protection, Silvergate issued a statement on its official website, saying that the bank had no exposure to FTX and noting that FTX’s deposits accounted for less than 10% of the bank’s total deposits of $11. 9 billion. Based on this data, FTX’s deposits were estimated to be around $1 billion. After FTX’s bankruptcy, these deposits would procedurally need to be returned to FTX’s creditors, raising market concerns over whether Silvergate could experience liquidity issues as a result. Consequently, Silvergate’s stock price fell by approximately 54% cumulatively last week. Market concerns over whether Silvergate might face liquidity problems due to the FTX bankruptcy continued to grow, and Silvergate’s stock price dropped about 54% in total last week. Voices of concern over Silvergate’s problems kept intensifying. On Twitter, it was reported that FalconX, a professional cryptocurrency trading platform, sent a letter to clients stating that it would stop using Silvergate’s SEN payment system services.In addition, Silvergate also provides cryptocurrency-related services to traditional companies. Notably, MicroStrategy borrowed $205 million from Silvergate in March to purchase Bitcoin, utilizing the SEN Leverage product under its SEN platform to issue a loan to MacroStrategy, a subsidiary of MicroStrategy. This event has also raised concerns that if Silvergate encounters difficulties and calls in the loan from MicroStrategy, it could force MicroStrategy to sell its Bitcoin holdings, potentially accelerating the deterioration of the domino effect triggered by the FTX bankruptcy.
On Twitter, it has been reported that professional cryptocurrency trading platform FalconX has sent a letter to clients stating that it will cease using Silvergate’s SEN services. Disclaimer: This article is intended solely to provide market information. All content and viewpoints are for reference only and do not constitute investment advice. They do not represent the views or positions of this platform. Investors should make their own decisions and transactions. The author and this platform shall not bear any responsibility for direct or indirect losses arising from investors’ transactions.
