<\/p>\n
Former Silvergate Bank chief risk officer Kate Fraher has publicly challenged the circumstances surrounding her 2024 settlement with the U.S. Securities and Exchange Commission, arguing that regulators never proved the bank\u2019s anti-money laundering controls had failed.<\/p>\n
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In comments published Wednesday, Fraher said she agreed to settle with the SEC to avoid what she described as a \u201cmulti-year battle\u201d with the regulator after the agency accused Silvergate executives of misleading investors about the bank\u2019s Bank Secrecy Act and anti-money laundering compliance procedures tied to crypto clients such as FTX.<\/p>\n
Her remarks came days after the SEC, under Chair Paul Atkins, rescinded its long-standing \u201cno deny\u201d settlement policy, which for decades prevented defendants from publicly disputing the agency\u2019s allegations after reaching settlements.\u00a0<\/p>\n
The regulator announced Monday that it would no longer enforce the rule, first adopted in 1972, saying the policy had created concerns that the SEC was shielding itself from criticism.<\/p>\n
Fraher said the policy change allowed her to finally speak openly about the case.<\/p>\n
\u201cThe process itself is designed to apply maximum pressure, and the human costs are real,\u201d Fraher said. She added that she was \u201cpersonally de-banked\u201d and had credit lines abruptly closed during the investigation.<\/p>\n
Back in July 2024, the SEC sued Silvergate Capital Corporation, former CEO Alan Lane and Fraher, alleging they misled investors about how the bank monitored suspicious transactions and complied with anti-money laundering obligations. SEC enforcement director Gurbir Grewal said at the time that Silvergate failed to detect roughly $9 billion in suspicious transfers involving FTX-related entities.<\/p>\n
<\/p>\n
As part of the settlement, Silvergate agreed to pay a $50 million civil penalty without admitting or denying the allegations. Lane settled for $1 million, while Fraher agreed to pay $250,000 and accepted a five-year ban from serving as a public company officer or director. Former CFO Antonio Martino did not settle and has continued contesting the SEC\u2019s allegations through his legal team.<\/p>\n
While regulators and lawmakers had tied Silvergate\u2019s downfall to the collapse of FTX in late 2022, Fraher said the bank remained operationally stable after restructuring its business in early 2023.<\/p>\n
Despite the bank suffering a deposit outflow of roughly 70% following FTX\u2019s bankruptcy, Fraher said Silvergate maintained \u201cappropriate capital levels\u201d and reduced its workforce to continue operating safely.<\/p>\n
Instead of market conditions alone, she blamed mounting pressure from financial regulators and policymakers for making the business impossible to continue. Her comments echoed arguments previously made by crypto industry figures who described the period as \u201cOperation Chokepoint 2.0,\u201d an alleged effort by U.S. banking regulators to distance the financial system from crypto companies.<\/p>\n
Among the most prominent voices was venture capitalist Nic Carter, who wrote in September 2024 that unnamed Silvergate insiders had described informal regulatory pressure to reduce crypto-related deposits to 15% of total liabilities. Carter argued that Silvergate\u2019s voluntary liquidation, rather than entering FDIC receivership, suggested the bank had been pushed toward closure through supervisory pressure instead of insolvency alone.<\/p>\n
Carter also linked the collapse of Silvergate to the subsequent failures of Signature Bank and Silicon Valley Bank during the 2023 regional banking crisis. According to his reporting, regulators intensified scrutiny on crypto-focused banking relationships after FTX collapsed, even though criminal wrongdoing tied directly to Silvergate\u2019s relationship with FTX was never proven.<\/p>\n
Elsewhere in Wednesday\u2019s remarks, Fraher praised Atkins and SEC Commissioner Hester Peirce for ending the SEC\u2019s gag policy, which she described as unconstitutional.<\/p>\n
Peirce had also criticized the policy earlier in 2024, arguing that settlement agreements restricting public criticism weakened transparency and did little to support investor protection. In a statement released Monday, she said both regulators and defendants should be free to publicly discuss enforcement cases after settlements are reached.<\/p>\n
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