Fed inspector blames crypto focus, nepotism for Silvergate Bank collapse

Crypto-friendly Silvergate Bank ultimately collapsed this year due to over-dependence on risky crypto deposits and nepotism that led to ineffective management, according to inspectors at the Federal Reserve.

In a Sept. 27 executive

Silvergate’s purported wrong-doings weren’t just limited to crypto. Investigators also claimed that nepotism plagued the banks’ senior management, leading to an incompetent and ineffective corporate structure that failed to address the many risks present at the time.

“Further, nepotism, evidenced in the several familial relationships among members of the bank’s senior leadership team, undermined the effectiveness of the bank’s risk management function.”

“Silvergate’s board of directors and senior management were ineffective, and the bank’s corporate governance and risk management capabilities did not keep pace with the bank’s rapid growth, increasing complexity and evolving risk profile,” concluded the report.

The bank voluntarily wound down in March 2023, meaning that the bank didn’t technically fail. This meant that the government did not have to step in and force it to pay back depositors.

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