SEC Charges Silvergate With Negligence-Based Fraud Concerning Compliance Program

SEC Charges Silvergate Capital, Former CEO for Misleading Investors about Compliance Program

The Securities and Exchange Commission today charged Silvergate Capital Corporation, its former CEO Alan Lane, and former Chief Risk Officer (CRO) Kathleen Fraher with misleading investors about the strength of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program and the monitoring of crypto customers, including FTX, by Silvergate’s wholly owned subsidiary, Silvergate Bank. The SEC also charged Silvergate and its former Chief Financial Officer, Antonio Martino, with misleading investors about the company’s losses from expected securities sales following FTX’s collapse. All parties charged, aside from Martino, have agreed to settle the SEC’s charges.

According to the SEC’s complaint, from November 2022 to January 2023, Silvergate, Lane, and Fraher misled investors in stating that Silvergate had an effective BSA/AML compliance program and conducted ongoing monitoring of its high-risk crypto customers, including FTX, in part to rebut public speculation that FTX had used its accounts at Silvergate to facilitate FTX’s misconduct. In reality, Silvergate’s automated transaction monitoring system failed to monitor more than $1 trillion of transactions by its customers on the bank’s payments platform, the Silvergate Exchange Network.

Chairman of Publicly Traded Health Care Company Convicted of Insider Trading

A federal jury in Los Angeles convicted the former CEO, executive chairman, and chairman of the board of directors of Ontrak Inc., a publicly traded health care company, for engaging in an insider trading scheme using Rule 10b5?1 trading plans.

“When Terren Peizer learned significant negative news about Ontrak, he set up Rule 10b5-1 trading plans to sell shares before the news became public and to conceal that he was trading on inside information,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri, head of the Justice Department’s Criminal Division. “With today’s verdict, the jury convicted Peizer of insider trading. This is the Justice Department’s first insider trading prosecution based exclusively on the use of a trading plan, but it will not be our last. We will not let corporate executives who trade on inside information hide behind trading plans they established in bad faith.”

Hindenburg Made Just $4 Million From $153 Billion Adani Rout

It was one of the most impactful short-seller reports ever: Hindenburg Research’s 2023 broadside against the Adani Group erased as much as $153 billion of market value.

But it turns out the US short-seller’s gains from the saga were tiny by comparison — just over $4 million.

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The contrast between Hindenburg’s gains and the wider impact underscores how opportune research can have far-reaching effects, even if it’s not always easy to profit from the fallout….

Next attack on federal agency power is already before the US Supreme Court

In a little-noticed June 14 petition to the justices, two educational groups that brought a Freedom of Information Act lawsuit against the U.S. Consumer Products Safety Commission asked the Supreme Court to take up the question of whether precedent dating back to 1935 shields commissioners heading modern-day federal agencies from being fired at the whim of the U.S. president.

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These modern agencies, the petition argued, have become a de facto fourth branch of the U.S. government, exercising profound power over the lives of all Americans without accountability to U.S. presidents or voters. The U.S. Constitution, the petition argued, does not countenance that regime.

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If the Supreme Court takes the case and ultimately agrees with the groups’ theory, its decision would call into doubt the constitutionality of dozens of U.S. agencies, including the Securities and Exchange Commission….

Donald Trump, crypto take aim at SEC as Biden allies raise alarms

In recent weeks, crypto investors have raised several names of potential nominees for SEC commissioner, in the event that Trump is elected to a second term, according to three people who have knowledge of the conversations.

These names include two former chairs of the Commodity Futures Trading Commission during the Trump administration: J. Christopher Giancarlo and Heath Tarbert.

Another name that has come up is Dan Gallagher, who served as an SEC commissioner during Barack Obama’s two terms as president and now works as chief legal officer at the investment platform Robinhood.

Gallagher said he’s honored to be floated as a possible SEC chair in a Trump administration.

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The fourth name that has been raised with people close to Trump is that of Paul Atkins, according to three people who have knowledge of the conversations.