A California judge has combined three investor lawsuits against the defunct cryptocurrency bank Silvergate Bank. involving bankrupt cryptocurrency exchange FTX.
On April 19, United States District Judge Jacqueline Scott Corley of the Northern District of California ruled that the three lawsuits would be consolidated. Each accuses Silvergate of helping to facilitate investor fraud by failing crypto exchange FTX.
All three cases were brought against Silvergate by four former investors. They will remain separate from other federal cases against FTX and its founder Sam Bankman-Fried, but will be combined by mutual agreement of the litigants, according to an April 19 report from Law360.
The order stated:
“The Silvergate cases involve common issues of fact and law, as they name common defendants, arise from the same alleged course of conduct, and assert overlapping causes of action, such that the Silvergate cases are suitable for consolidation.”
Matson Magleby, Golam Sakline, Nicole Keane and Sonam Bhatia filed the trio of lawsuits in February.
The plaintiffs allege that Silvergate aided and abetted FTX’s alleged misconduct. The actions included the processing of illegitimate transfers of funds from FTX clients to its sister trading company Alameda Research.
Silvergate made public its plans for a “voluntary liquidation” of assets and closure of operations in early March.after a bank run. Besides, the bank was the subject of a class action lawsuit in January for violation of securities law.
FTX filed for bankruptcy in November last year, and its collapse and ensuing crypto market crash created liquidity problems for Silvergate.
In a related event, The New York state financial regulator said the collapse of Signature Bank was caused by a run on a broad depositor base from all business sectors, not by cryptocurrencies.
In March, federal regulators seized Signature Banka cryptocurrency friendly bank.
At a House Financial Services Committee hearing on stablecoins on April 18, New York State Department of Financial Services (NYDFS) Superintendent Adrienne Harris said that “it is a misnomer that Signature Bank’s failure was related to cryptocurrency.”
According to a Bloomberg report on April 19, Depositors, including food wholesalers, trustees, trust accounts, and law firms, left the bank and sparked the run.
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