A California judge has consolidated three investor cases regarding the collapsing crypto exchange FTX against defunct crypto bank Silvergate Bank. The three lawsuits were combined April 19 by United States District Judge Jacqueline Scott Corley of the Northern District of California. Each accused Silvergate of facilitating investor fraud through the defunct FTX crypto exchange.
Four former investors filed three lawsuits against Silvergate. According to an April 19 Law360 story, they will remain separate from previous federal actions against FTX and its founder Sam Bankman-Fried, but will be combined by mutual consent of the plaintiffs.
According to the order, “the Silvergate cases involve general questions of law and fact, because they name co-defendants, arise from the same alleged acts, and assert overlapping causes of action, making the Silvergate cases suitable for consolidation.”
The three lawsuits were filed in February by Matson Magleby, Golam Sakline, Nicole Keane and Sonam Bhatia. Silvergate, the plaintiffs claim, assisted and enabled FTX’s alleged misconduct. Processing an unlawful FTX customer money transfer to its sister trading firm, Alameda Research, was one of the actions taken.
Following the bank run, Silvergate announced plans to “voluntarily liquidate” its assets and cease operations in early March. Additionally, the bank was slammed with a class action lawsuit for securities law violations in January. FTX declared bankruptcy in November last year, and the subsequent slump in the crypto market exacerbated liquidity problems for Silvergate.
In a similar event, New York’s banking regulator has stated that Signature Bank’s failure was fueled by the flight of its broad depositor base across all sectors of the economy, not crypto. Federal regulators seized crypto-friendly Signature Bank in March.
On April 18, at a hearing on stablecoins held by the House Financial Services Committee, New York State Department of Financial Services (NYDFS) Superintendent Adrienne Harris stated, “It is misguided that Signature Bank’s fiasco is crypto-related.”
According to a Bloomberg story from April 19, he stated that depositors such as wholesale food suppliers, fiduciaries, trust accounts, and legal firms left the bank, causing runaways.