Dive Brief:

• Antonio Martino, the former CFO of Silvergate Capital, is asking the Securities and Exchange Commission to dismiss claims that he misled investors in the wake of the 2022 collapse of cryptocurrency exchange FTX, according to a recent court filing. The collapse ultimately resulted in Silvergate Capital declaring Chapter 11 bankruptcy last year, according to a Tuesday court filing.
• The motion for dismissal comes after the SEC charged several former executives of Silvergate with misleading investors last year, including charging Martino with doing so regarding the results of expected securities sales related to FTX’s collapse, according to a press release at the time.
• However, Martino’s lawyers in the filing this week assert that the SEC’s claims lack “any allegation that Mr. Martino had a personal financial motive,” for the alleged fraud. Additionally, the motion argues that both the ex-CFO and Silvergate “disclosed the very losses the SEC alleges to be at issue, as accumulated other comprehensive loss (“AOCL”) instead of as [an other than temporary impairment] OTTI,” according to the filing in the United States District Court in the Southern District of New York.

Dive Insight:

Months before Silvergate Capital filed for bankruptcy in September, the SEC in July announced settled charges against several former executives, according to a press release at the time. As well as its charges against Martino, the SEC charged Silvergate, its former CEO Alan Lane, and its former Chief Risk Officer 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,” according to the SEC’s release.

At the time, all parties aside from Martino agreed to settle the charges, the SEC said.

A 17-year alum of Citi, Martino served as CFO for the La Jolla, California-based Silvergate for a four-year period beginning in 2019, according to his LinkedIn profile. He currently serves as finance chief for financial software provider PayZen.

The SEC alleges that Martino “engaged in a fraudulent scheme to mislead investors about the Bank’s dire financial condition,” according to the agency’s complaint filed in July 2024. As its finance chief, Martino was aware the bank had borrowed billions in 2022, and that the debt was scheduled to mature in early 2023, as well as that the bank’s “only viable source of funding to repay that debt would be to sell billions in securities in the First Quarter of 2023,” the complaint states.

The SEC in its complaint also asserts that Martino then fraudulently approved an earnings release which stated the bank expected to sell only $1.7 billion in securities for the quarter after already selling $1.5 billion — implying the bank would only sell $200 million more in the rest of the quarter, “when he knew or recklessly disregarded that the Bank was more likely than not to be required to sell far more than that.” 

However, the SEC’s complaint is “implausible,” because it “characterizes the fraud as one involving alleged false statements of fact relating to OTTI,” the motion says. “In reality, however, these Statements all reflect the Bank’s and Mr. Martino’s opinions and predictions regarding highly technical OTTI accounting calculations, determined by a forward-looking assessment of the Bank’s future expected securities sales and which…Mr. Martino and the Bank expressly cautioned investors not to unduly rely upon,” according to the motion. The ex-CFO and the company also “contemporaneously disclosed, in voluminous detail, that the Bank was under severe stress,” the motion reads.

“In short, ‘the market got the message’ that the Bank was experiencing a financial and operational crisis,” the request for dismissal reads.

The ex-CFO’s motion for dismissal is a lingering note in the saga of FTX’s collapse, which had a widespread impact on both the cryptocurrency and banking industries. Silvergate Bank, which focused heavily on cryptocurrency, filed for Chapter 11 bankruptcy in March 2023 after the financial institution failed to recover in the wake of the FTX's collapse in November 2022, Industry Dive sister publication Banking Dive previously reported.

FTX’s collapse triggered a run on the bank, forcing it to sell assets at a loss in an attempt to cover about $8.1 billion in withdrawals. The bank’s parent company Silvergate Capital then followed suit with its own Chapter 11 filing in September 2024.

The Linklaters LLP law firm that represents Martino declined to comment beyond the motion. The SEC declined to comment beyond its public filings.