Silvergate CEO Alan Lane wrote a Dec. 5 public letter to reassure stakeholders that the firm employs the best due diligence process and has a robust risk management control.
Silvergate addresses FTX, Alameda exposure
Lane wrote that the financial institution conducted “significant due diligence on FTX and its related entities, including Alameda Research, both during the onboarding process and through ongoing monitoring.”
According to Lane, Silvergate carried out payments directed to Alameda Research based on instructions from the sender and consistent with the best industry practice. The CEO noted that if the firm “detects activity that is unexpected or potentially concerning in any account, we conduct an investigation and, when required, confidentially file a suspicious activity report in accordance with federal regulation.”
Concerns were raised previously that FTX’s implosion impacted Silvergate. However, Lane revealed that the firm’s exposure to the bankrupt crypto exchange was limited to less than 10% of its total deposits as of Sept. 30.
Reports also revealed that the financial service provider was exposed to bankrupt crypto lender BlockFi. According to the report, less than $20 million of its total deposits was from the lender.
Silvergate has a resilient balance sheet and ample liquidity
The CEO also addressed concerns about its liquidity, saying its customers’ deposits are safely held.
Apart from that, Lane revealed that the firm’s entire investment securities portfolio could be pledged for borrowings at other financial institutions to satisfy its customers’ withdrawal requests.
Lane said the firm’s business was designed to accommodate deposit inflows and outflows under different market conditions.
The CEO added that short sellers and other opportunists are spreading the current speculation and misinformation about its business to capitalize on the market uncertainty. According to him, all of the firm’s customers have continued to access their U.S. dollar deposits, and its Silvergate Exchange Network (SEN) has continued to operate.
He concluded that:
“Silvergate operates in accordance with the Bank Secrecy Act and the USA PATRIOT Act.”
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