A legal battle is brewing in California as the collapsed crypto bank Silvergate Bank faces not one, not two, but three lawsuits filed by former investors, including cryptocurrency exchange FTX.
The lawsuits, filed by Matson Magleby, Golam Sakline, Nicole Keane, and Sonam Bhatia, accuse Silvergate of facilitating investor fraud through FTX.
While these cases will remain separate from federal proceedings against FTX and its founder Sam Bankman-Fried, they will be joined by mutual consent of the claimants.
District Judge Jacqueline Scott Corley has deemed these cases “momentous,” as they highlight the risks and challenges facing the crypto industry.
The fate of Silvergate Bank and FTX hang in the balance as the legal system seeks to uncover the truth behind these serious allegations.
“The Silvergate cases involve common questions of law and fact, as they name common defendants, arise from the same alleged course of conduct, and assert overlapping causes of action, such that the Silvergate cases are appropriate for consolidation,” the order said.
Explosive allegations have been made against Silvergate Bank, accused of aiding and abetting the crypto exchange FTX’s significant wrongdoing.
The plaintiffs in the case claim that Silvergate was complicit in facilitating unlawful transfers of FTX client funds to its affiliated trading company, Alameda Research.
Adding fuel to the fire, FTX declared bankruptcy last year, and the subsequent crypto market downturn only worsened Silvergate’s liquidity issues.
But Silvergate isn’t the only crypto bank in trouble – federal officials recently seized the crypto-friendly Signature Bank in March.
This turn of events was triggered by a mass exodus of depositors from a broad range of economic sectors, according to New York state’s banking regulator.
The crypto industry is clearly facing significant headwinds, and these legal battles could have far-reaching implications for the industry as a whole.
It’s been a rocky road for Silvergate Bank, which announced its intention to liquidate assets and cease operations in March following a bank run and a class-action complaint for securities law breaches.
But that’s not the only legal battle plaguing the crypto industry.
Taylor Swift’s $100 million sponsorship deal with FTX has also come under fire due to concerns over unregistered securities.
Swift was the only celebrity endorser to question the crypto exchange, according to a lawyer conducting a class-action case against multiple FTX promoters.
The case seeks restitution for consumers who lost money when FTX declared bankruptcy.
Meanwhile, FTX founder Sam Bankman-Fried is fighting off charges of fraud, conspiracy, and campaign funding restriction violations.
His trial is set for October, and the eyes of the crypto industry are watching closely.
These legal battles serve as a stark reminder of the risks and challenges facing the rapidly evolving crypto landscape.