What Judge’s Silvergate FTX Fraud Ruling Means in Its Case

The court supported the claim that Silvergate knowingly aided the FTX fraud and had a strong incentive to conceal the operations.

A man and a dog wearing a costume standing at a destroyed city in front of a Silvergate building.
  • The FTX-Silvergate Bank lawsuit will proceed as the court validates investor claims.
  • A judge has rejected Silvergate Bank’s motion to dismiss.
  • The sentencing hearing for the convicted FTX founder is fast approaching.

As one of the largest financial fallouts in crypto history, the 2022 FTX collapse resulted in a flurry of legal actions, roping in major institutions and venture firms. In February 2023, a group of FTX investors filed a class action lawsuit against Silvergate, alleging the bank’s involvement in the multi-billion dollar fraud scheme orchestrated by Sam Bankman-Fried.

Over a year later, the legal tussle has recently gained momentum as a federal court in San Diego has validated the investors’ claims.

FTX-Silvergate Ties Lawsuit Progresses

According to a Tuesday filing, US Judge Ruth Bermudez Montenegro has ordered the advancement of the class-action lawsuit against Silvergate Bank, its parent company Silvergate Capital Corporation, and CEO Alan Lane, which alleged that the defendants hid “the true nature of FTX” from its customers.


This follows the rejection of the bank’s motion to dismiss, filed on June 19, 2023. While Silvergate argued that the bank “conducted significant due diligence on FTX and its related entities, including Alameda,” the court asserted otherwise, emphasizing that Silvergate neglected its “duty of care” to customers.

“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,” the filing stated.

Judge Bermudez Montenegro endorsed the plaintiff’s claim that Silvergate benefited from the FTX and Alameda’s fraudulent operations, evidenced by the staggering 889% increase in its annual net income.

“Before Silvergate went public on November 7, 2019, and before Silvergate attracted FTX as a client, Silvergate had an annual net income of only $7.6 million. By 2021, Silvergate’s annual net income had increased to $75.5 million,” it stated, asserting that  the bank had a strong incentive to conceal the fraud.

The judge emphasized that the plaintiffs adequately alleged that the defendants aided and abetted the FTX and Alameda fraud, advancing the case to further scrutinize Silvergate’s involvement in the activities. This coincides with the looming sentencing of FTX Founder Sam Bankman-Fried, who was also convicted of fraud.

SBF on His Way to Jail

The upcoming sentencing of SBF has thrust the disgraced crypto mogul under renewed spotlight as questions of his fate linger amid an escalating legal tussle between his lawyers and United States prosecutors.


In a sentencing memorandum filed on March 13, prosecutors stated that SBF deserves no less than 40 to 50 years behind bars. They highlighted his lengthy list of offenses, including wire and securities fraud, money laundering conspiracy, and illegal campaign contributions.

Bankman Fried’s legal team however opposed, criticizing the 50 years sentencing proposal as exceeding the judgment necessary to satisfy the goals of his punishment. The lawyers emphasized the recommendation does not align with the principles of justice, and is equivalent to “a death-in-prison” sentencing.

SBF is incarcerated in the New York Metropolitan Detention Center, awaiting a sentencing hearing scheduled for March 28, 2024.

On the Flipside

  • While Silvergate announced plans to wind down its operations and liquidate following the FTX collapse, the bank remains liable for its actions and ensuing legal consequences.
  • Other firms, including  Sequoia Capital, Thoma Bravo, and Paradigm, were also targets of lawsuits following the FTX fallout.
  • FTX remains indebted to an extensive list of creditors, with over $8 billion in liabilities.

Why This Matters

The ongoing tussle between FTX’s customers and Silvergate highlights the enduring aftermath of the exchange’s implosion, even years later. Additionally, the judge’s validation of the investors’ claims confirms the questionable relationship between Silvergate and FTX, which has significant implications for the bank’s reputation.

Read more on the efforts to bag SBF little to no time behind bars:

“SBF Is Selfless”: Lawyers Seek Shorter Term with Image Shift 

Here’s how Bitget is championing advocacy for gender balance in the industry:

Bitget’s Gracy Chen Joins UN to Promote Gender Equality

This article is for information purposes only and should not be considered trading or investment advice. Nothing herein shall be construed as financial, legal, or tax advice. Trading forex, cryptocurrencies, and CFDs pose a considerable risk of loss.

Grace Abidemi

Grace Abidemi, a cryptocurrency reporter at DailyCoin, covers industry developments and trends. She previously worked as a freelance writer. With a Bachelor's degree in German Language and certifications in marketing and storytelling, Grace creates engaging content. When not working, she's in Nigeria, mastering cooking and canvas painting, and enjoys learning about different cultures and languages.