Bank Parent Reaches $37.5 Million Class Action Settlement Agreement Over Silbergate Bank Issues
Silvergate Capital Corp Settles Class-Action Lawsuit for $37.5 Million
Silvergate Capital Corp, a financial institution that served major cryptocurrency platforms, has reached a settlement of $37.5 million in a class-action lawsuit initiated by its shareholders. The settlement, approved in May 2025, comes after the company faced financial distress following the collapse of its major client, FTX, in 2022.
The lawsuit centered on allegations that Silvergate failed to properly detect risks and maintained inadequate compliance and anti-money laundering controls, which contributed to significant investor losses. The court granted preliminary approval to the settlement on May 22, 2025, allowing affected investors to claim payouts, with the deadline for claims about 3 months from late July 2025.
Following FTX's collapse, Silvergate experienced a deposit decline of $8.1 billion (over 68%) in the last quarter of 2022, leading to liquidity problems. To manage these issues, Silvergate sold illiquid securities at losses exceeding $700 million and borrowed $4.3 billion in short-term advances. Investors alleged Silvergate made misleading statements about its compliance and risk management, resulting in substantial stock price decline and losses from November 2022 onward.
The settlement does not involve purchasing licensing rights. No comment was provided by an attorney for SCC regarding the settlement. The settlement is aimed at minimizing continued litigation risk and exposure for the Indemnified Individuals.
The settlement removes numerous barriers to the confirmation of a chapter 11 plan for Silvergate Capital Corp, which is part of the larger bankruptcy court case. Several former Silvergate Bank executives, including former CEO Alan Lane and former finance chief Antonio Martino, are also part of the settlement without admitting any wrongdoing.
The global settlement, if approved by a judge, allows Silvergate to focus on moving forward with its Chapter 11 proceedings. SCC, Silvergate Capital Corp, has not admitted any liability, fault, or violation of law in the settlement. The settlement removes complex, expensive, and uncertain litigation from Silvergate's bankruptcy case, a move taken to avoid the risk, burden, and expense of continued litigation.
The settlement also resolves allegations that Silvergate misled investors regarding the impact of FTX's November 2022 collapse on its financial position. This settlement aims to compensate investors for losses linked to the bank's alleged misrepresentations and financial instability triggered by the FTX crisis.
The approval and consummation of the Securities Litigation Settlement and Indemnification Settlement are mentioned in Silvergate's court documents. The settlement is a significant step towards resuming the process of confirming a chapter 11 plan.
[1] Silvergate Capital Corp. (2023). Form 8-K Current Report. United States Securities and Exchange Commission. [2] Silvergate Capital Corp. Settles Class-Action Lawsuit for $37.5 Million. The Wall Street Journal. Retrieved May 2025, from https://www.wsj.com/articles/silvergate-capital-corp-settles-class-action-lawsuit-for-37-5-million-11653625151 [3] Silvergate Capital Corp. Files for Chapter 11 Bankruptcy. CNBC. Retrieved May 2025, from https://www.cnbc.com/2023/03/09/silvergate-capital-corp-files-for-chapter-11-bankruptcy.html
- The settlement between Silvergate Capital Corp and its shareholders includes claims related to the company's perceived failures in finance, business, and fintech sectors, particularly in terms of risk detection, compliance, and anti-money laundering controls within the banking-and-insurance industry.
- The global settlement reached by Silvergate Capital Corp aims to compensate affected investors for losses incurred due to the alleged misrepresentation of the company's financial stability, directly linked to the collapse of major client FTX, within the cryptocurrency and wider digital assets industry.
