In Re Silvergate Capital Corporation Securities Litigation

Court: United States District Court for the Southern District of California
Case Number: 3:22-cv-01936
Class Period: 11/07/2019 - 03/21/2023
Case Leaders: Hannah Ross, John Rizio-Hamilton, Jonathan D. Uslaner
Case Team: Lauren M. Cruz, Nicole Santoro, Shane Avidan

This is a securities class action filed on behalf of (a) all persons and entities who purchased or otherwise acquired the publicly traded stock of Silvergate Capital Corporation (“Silvergate”) between November 7, 2019 through March 21, 2023, inclusive (the “Class Period”), and were damaged thereby; and (b) all persons or entities who purchased Silvergate stock in or traceable to Silvergate’s securities offerings conducted on or about January 20, 2021, March 18, 2021, July 28, 2021, and December 6, 2021 (collectively, the “2021 Offerings”), and were damaged thereby. The action alleges violations of the Exchange Act of 1934 and violations of the Securities Act of 1933 against Silvergate, its CEO, Alan Lane, and certain other executives, directors, and underwriters involved in the 2021 Offerings. The Honorable James Edward Simmons Jr. is presiding over the case.

On January 19, 2023, Bernstein Litowitz Berger & Grossmann LLP (“BLB&G”) filed a class action lawsuit in the U.S. District Court for the Southern District of California, captioned International Union of Operating Engineers, Local No. 793, Members Pension Benefit Trust of Ontario v. Silvergate Capital Corp., No. 3:23-cv-00099 (S.D. Cal.).  On February 28, 2023, the Court appointed Lead Plaintiffs and approved BLB&G to serve as co-lead counsel.

Lead Plaintiffs filed the amended, operative complaint on May 11, 2023. Defendants filed their motions to dismiss the complaint on July 10, 2023, and the parties completed briefing on October 23, 2023. Judge Simmons held a hearing on Defendants’ motions on November 29, 2023. No order has issued.

Background of Exchange Act Claim

As alleged in the Complaint, in just a few years, Silvergate went from a local community lending bank to the go-to bank of the world’s $600 billion cryptocurrency industry.  Silvergate’s deposits ballooned 10-fold; its stock price skyrocketed almost 20-fold; and its top executives profited handsomely. But Silvergate achieved these results through deception, giving the Silvergate “seal of approval” to and bringing aboard as “Silvergate-approved” customers some of the biggest sham entities in American history. All the while, Silvergate and its CEO, Alan Lane, time-and-again assured the public that the Bank conducted extensive vetting, due diligence, and monitoring of customers—which supposedly was Silvergate’s “secret sauce” that provided it a “distinct competitive advantage.” Customers and investors alike trusted these representations, pouring in their deposits and sending the stock price soaring.

Unknown to investors at the time, Silvergate did not vet, perform due diligence of, or monitor its clients. Rather, to drive deposits, Silvergate indiscriminately banked cryptocurrency entities—many of which were outright shams that fleeced innocent customers of billions of dollars. As the public eventually learned the true facts, Silvergate’s customers fled and its stock price tumbled almost 100%. The Bank was forced into liquidation; its employees were nearly all fired; the DOJ is conducting an investigation; Silvergate failed to file its annual report with the SEC; and a bipartisan group of U.S. senators lambasted Lane and Silvergate for their “severe due diligence failures” and “egregious failure” to “monitor for and report suspicious financial activity carried out by its clients.”