Word of God Church Sues Silvergate Bank Over FTX Crypto-Scheme

News | May 31, 2023 By:

The Word of God Church, a Texas-based church, has filed a lawsuit against a San Diego-based crypto bank Silvergate Bank, alleging that the bank misappropriated $25 million of the church’s funds and facilitated a fraudulent scheme by FTX, a cryptocurrency exchange that declared bankruptcy in November 2022. Silvergate had a close relationship with FTX and its founder, Sam Bankman-Fried, and processed billions of dollars of transfers between FTX and its affiliated hedge fund, Alameda Research.

Silvergate was established in 1988 as a savings and loan association and reorganized into a bank in 1996. It began serving cryptocurrency clients in 2016 and became one of the leading banks in the industry. It launched an IPO in 2019 and saw its share price soar by more than 1,500% by November 2021 due to the cryptocurrency boom.

FTX was a cryptocurrency exchange that emerged in 2019 and quickly rose to become one of the largest platforms in the world, with a valuation of $32 billion. However, it collapsed in November 2022 and filed for bankruptcy, amid allegations of fraud and market manipulation by Bankman-Fried and Alameda Research.

The Word of God Church became a customer of FTX in September 2022 and agreed to deposit $25 million into its account. After FTX’s bankruptcy, the church demanded Silvergate return its deposit, but Silvergate refused. The church claims that its deposit was part of the $8 billion that FTX transferred to Alameda Research using Silvergate’s accounts.

The lawsuit accuses Silvergate and its CEO, Alan Lane, of having unparalleled knowledge of FTX and Alameda Research’s suspicious activity but failing to report or investigate it. Instead, Silvergate continued to accept deposits and process transfers for both entities, earning enormous profits from them.

“Despite the glaring red flags, there is no evidence that Silvergate or Lane took any action to report or investigate FTX and Alameda’s suspicious activity,” the lawsuit said. “Rather, Silvergate continued accepting deposits into both entities’ accounts and processing transfers between them. In doing so, Silvergate raked in enormous profits from the ever-increasing customer deposits in FTX and Alameda accounts.”

The case will now be assigned to a judge and advance in the Superior Court of San Diego.