• Mon. Mar 4th, 2024

Signature Bank Lawsuit Alleges That It Facilitated FTX Fraud

Feb 8, 2023

A class-action lawsuit has been filed against Signature Bank, which is based in New York, which alleges that it facilitated activities of the FTX crypto exchange before it collapsed in November last year.

The lawsuit was filed on Monday in the Southern District Court of New York by Statistica Capital, an algorithmic and investment trading firm.

The lawsuit

The company has alleged in the lawsuit that Signature Bank was aware of FTX fraud and also substantially facilitated it.

Once one of the leading crypto exchanges in terms of trading volume, FTX and its subsidiaries filed for Chapter 11 bankruptcy on November 11th after a liquidity crisis.

Sam Bankman-Fried, the founder of the crypto exchange, is now facing different criminal charges from the US Department of Justice (DOJ), the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) for his actions at his companies.

Signature Bank had served the FTX crypto exchange, along with its sister trading desk, Alameda Research, which was also founded by Sam Bankman-Fried.

Statistica has accused the crypto bank of allowing FTX to combine its user accounts with Signet, the blockchain-based payments network of Signature Bank.

The details

According to the filing, Signature had had knowledge of the FTX fraud taking place since June 2020 and Statistica said that plaintiffs had informed the bank that the suspicious transfer of funds to Alameda had initially been for FTX.

However, Signature had not paid heed to any of the warnings and had transferred the funds to Alameda Research.

The company further alleged that Signature had also facilitated the fraud via public promotion of the crypto exchange.

In addition, the bank had not suspended, closed, or even limited FTX and Alameda accounts, even though it was aware that they were violating the terms of service of FTX itself.

Statistica also said that Signature Bank had also accepted more customer deposits into Alameda Research, even after it had become aware of the fraud.

Signature Bank

The fourth quarter report of Signature Bank showed a net loss of $1 billion attributable to shareholders and the financial institution had put the blame on the ‘transformational shift’ in the crypto sector that resulted in a crisis of confidence.

The bank had also announced in the previous year that it would reduce its digital assets banking deposits.

The news of a class-action lawsuit against Signature Bank comes soon after a number of American senators, including crypto critic, Elizabeth Warren, had called for a closer look at Silvergate.

This is another crypto-friendly bank. The lawmakers had sent a letter to Alan Lane, the CEO of the bank, in which they highlighted the bank’s dealings with FTX.

The lawmakers alleged in the letter that Silvergate’s dealings with the now-defunct crypto exchange had exposed the traditional banking system to the risks associated with the crypto market.

Therefore, they demanded that Silvergate provide more information about its relationship with FTX and its dealings in order to shed light on the matter.

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