Ex Silvergate officer says regulatory pressure forced bank shutdown

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’s anti-money laundering controls had failed.

Summary

• Former Silvergate executive Kate Fraher said she settled with the SEC to avoid a lengthy court fight and denied that regulators proved the bank’s AML controls had failed.
• Fraher linked Silvergate’s closure to regulatory pressure on crypto banking rather than the deposit run that followed FTX’s collapse.
• The comments came days after the SEC ended its decades-old rule barring settling defendants from publicly denying enforcement allegations.

In comments published Wednesday, Fraher said she agreed to settle with the SEC to avoid what she described as a “multi-year battle” with the regulator after the agency accused Silvergate executives of misleading investors about the bank’s Bank Secrecy Act and anti-money laundering compliance procedures tied to crypto clients such as FTX.

Her remarks came days after the SEC, under Chair Paul Atkins, rescinded its long-standing “no deny” settlement policy, which for decades prevented defendants from publicly disputing the agency’s allegations after reaching settlements. 

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.

Fraher said the policy change allowed her to finally speak openly about the case.

“The process itself is designed to apply maximum pressure, and the human costs are real,” Fraher said. She added that she was “personally de-banked” and had credit lines abruptly closed during the investigation.

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.

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’s allegations through his legal team.

Fraher disputes the collapse narrative

While regulators and lawmakers had tied Silvergate’s downfall to the collapse of FTX in late 2022, Fraher said the bank remained operationally stable after restructuring its business in early 2023.

Despite the bank suffering a deposit outflow of roughly 70% following FTX’s bankruptcy, Fraher said Silvergate maintained “appropriate capital levels” and reduced its workforce to continue operating safely.

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 “Operation Chokepoint 2.0,” an alleged effort by U.S. banking regulators to distance the financial system from crypto companies.

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’s voluntary liquidation, rather than entering FDIC receivership, suggested the bank had been pushed toward closure through supervisory pressure instead of insolvency alone.

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’s relationship with FTX was never proven.

Elsewhere in Wednesday’s remarks, Fraher praised Atkins and SEC Commissioner Hester Peirce for ending the SEC’s gag policy, which she described as unconstitutional.

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.