Alameda, FTX, Silvergate discussed on CoinDesk Podcast Network


Need to discuss silvergate bank. Silvergate has been under heavy scrutiny this year as one of the few banks to actually take on banking for the crypto sector. It's ties to FTX have been most recently in focus. Last month, silvergate was under the microscope as a solvency risk. They reported that FTX only deposited with them and that FTX represented less than 10% of the $12 billion to bank held for crypto clients at the end of September. Since then, the focus has shifted to the dubious relationship between FTX and Alameda. Basically, the issue is that Sam during his extensive PR tour has been saying that before FTX was able to get its own banking relationships, it would have exchanged clients send money to Alameda instead. In a regulatory filing on Monday, silvergate acknowledged that it had processed wire transfers for Alameda. Silvergate CEO Alan lane is basically pushing back saying that whatever the intent was from Sam and co, Alameda had bank accounts with them, so when they got payments to Alameda, they processed them in credited to those accounts at Alameda. In other words, to the extent that these were FTX clients that should have gone to FTX accounts, that's FTX job, not silver Gates job. At least that's the claim that Allen lane seems to be making. Still, some aren't content with silver Gates answers to questions around due diligence. Count markets among those as silvergate stock prices down 84% this year and around 50% since all the FTX revelations came about compared to 23% in general for banks. Politicians are also getting up in this right now. Yesterday, senators Elizabeth Warren and John Kennedy, as well as congressman roger Marshall, wrote silvergate a letter demanding some answers. The letter cuts straight to the quick of the $10 billion of customer funds transferred to Alameda and what silver Gates potential role was. From the letter, quote, mister bankman fried has himself admitted that FTX customer funds were improperly transferred to Alameda's bank accounts. When asked how FTX customer deposits ended up in Alameda's accounts, mister free told vox that the company did not originally have a bank account, and so it directed customers to wire money to Alameda's account with silvergate in exchange for assets on FTX. According to mister bankman freed, executives at the company quote forgot about the scheme until the company imploded, telling a reporter, quote, it looks like people wired 8 billion to Alameda and oh God, we basically forgot about the stub account that corresponded to that, and so it was never delivered to FTX. Silvergate provided banking services to both Alameda and FTX, raising questions about the bank's role in facilitating the improper transfer of FTX customer funds to Alameda. quote some FTX customers continue to send wire transfers to Alameda silvergate account as recently as this year. It appears that silvergate did nothing to halt these activities. Simply put they write later, Alameda's depository account with your bank appears to be at the center of the improper transmission of FTX customer funds. Now where this led the congressman and senators, who was a set of questions. Were you aware that FTX was directing its customers to wire money to Alameda's account with your bank? Did silvergate flag a suspicious the movement of funds to Alameda accounts or between Alameda accounts and FTX or FTX affiliate accounts. Before November 11th, 2022, were you aware that Alameda research LLC was a distinct company from FTX and its subsidiaries. Has silvergate ever undergone an independent audit of its BSA anti money laundering compliance program. Did silvergate have any communication with representatives from Alameda FTX or FTX affiliated entities regarding concerns about the transfer of funds into silvergate. Et cetera, et cetera, et cetera now I'm certainly not jumping on some screw silvergate bandwagon. There are plenty of people there already, including short seller Mark cahoots, who is one of the loudest voices calling out SPF for months. Still, silvergate has been one of the only banks actually willing to take the risk of banking crypto companies, and I'm going to be pretty pissed if they didn't behave improperly and get caught up in Sam's fallout. However, to the extent that they helped perpetrate the fraud, this really does need to be investigated, no matter how unpalatable or unfunded it seems. All of this continues to leave crypto in a very liminal in between moment. The industry is waiting to see justice served to Sam. But it's also waiting to see whether other institutions will fall. DCG and genesis are high on that list of WTF is going on. But in the vacuum there is emerging a clear category of winner and I'm not talking about binance, although clearly they're the last exchange standing when it comes to inside the industry itself. Know that likely winner is trad 5. That was reinforced today when Reuters reported that Goldman Sachs is planning to spend tens of millions of dollars to invest in or buy outright crypto companies that are newly repriced, let's say, in the wake of MTX is collapse. Matthew McDermott, who's Goldman's head of digital assets, told Reuters that FTX is implosion, has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks are seeing an opportunity to pick up business. In an interview McDermott said, quote, we do see some really interesting opportunities priced much more sensibly. On FTX, he said, it's definitely set the market back in terms of sentiment. There's absolutely no doubt of that. If the X was a poster child in many parts of the ecosystem, but to reiterate, the underlying technology continues to perform. Now, as of this recording apparently, the firm is doing due diligence on a number of different crypto firms, although they didn't specify which. So I think there are a few ways to look at this. The first is obviously as a vote of confidence, and Reuters itself sort of nails his angle, saying, while the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows its senses a long-term opportunity. Second, I think that this does show a trend but not a ubiquitous one. On the trend side fidelity recently opened

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