According to the claims, the corporation and its officials willfully misled investors with positive comments despite allegations of money laundering and plummeting stock prices.
On January 10, a class-action lawsuit was filed in the United States District Court for the Southern District of California against Silvergate Capital, the operator of the Silvergate Exchange Network and the parent company of Silvergate Bank. The litigation was filed on behalf of all Silvergate securities purchasers between November 9, 2021, and January 5, 2023, alleging violations of the Securities Exchange Act of 1934.
Silvergate CEO Alan Lane and CFO Antonio Martino were also named as defendants in the lawsuit. In the lawsuit, the plaintiff alleged that Silvergate’s software failed to detect instances of money laundering “in excess of $425 million,” for which the corporation was likely to face regulatory ramifications. According to the legal documents:
“Defendant’s optimistic representations regarding the Company’s business, operations, and prospects were substantially misleading and/or without a reasonable foundation,” the court said. […] Silvergate’s securities traded at artificially inflated prices during the Class Period as a result of these materially false and/or misleading representations and/or failures to disclose.”
“Defendants also knew that the public documents and statements made or distributed in the name of the Company were materially false and/or misleading,” the court said.
The assertion that the company was involved in the transfer of $425 million to “South American money launderers” is based on a tweet from Marcus Aurelius Research on November 15. That tweet, as well as the November 17 release of the Bear Cave newsletter, allegedly contributed to a large drop in the Silvergate share price. The share price fell further after a Silvergate press release stated that digital asset deposits at the bank fell 68% in the fourth quarter of 2022, from $11.9 billion to $3.8 billion.
Silvergate shares are traded on the New York Stock Exchange, and the lawsuit says that the class members could number in the “hundreds or thousands,” the identities of whom have yet to be revealed.
In recent months, Silvergate has come under greater scrutiny. On December 14, a class-action lawsuit was launched against Silvergate for their alleged role in moving FTX customer monies to Alameda Research. Its inability to pay the run of withdrawals compelled it to lay off personnel and sell assets at a loss, as revealed earlier in January.