The lawsuit, filed in the U.S. District Court for the Southern District of New York on Monday by investment and algorithmic trading firm Statistica Capital, alleges that Signature “had actual knowledge of and substantially facilitated the now-infamous FTX fraud.”
FTX, once a top-three crypto exchange by trading volume, and its sister company Alameda Research filed for Chapter 11 bankruptcy protection in November 2022 following a liquidity crisis.
The exchange’s founder Sam Bankman-Fried faces various charges from the U.S. Department of Justice, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC) related to his actions at the companies.
Statistica warns of suspicious transactions
Statistica is now accusing Signature Bank, which served both FTX and Alameda, of allowing the exchange to combine user accounts with the crypto bank's blockchain-based payments network dubbed Signet.
Per the filing, Signature was aware of the FTX fraud since at least June 2020, with Statistica claiming that plaintiffs “expressly” told the bank that suspicious funds transfers to Alameda initially were for FTX.
Despite the warnings, Signature allowed the funds to be transferred to Alameda anyway.
It is also alleged that Signature “substantially facilitated the FTX fraud” by publicly promoting the crypto exchange, failing to close, suspend, or otherwise limit any Alameda and FTX accounts even though the bank knew that the accounts violated FTX’s own terms of service, as well as by accepting additional customer deposits into Alameda accounts after learning of the fraud.
Decrypt didn’t immediately hear from Signature Bank after reaching out for additional comment.
Signature Bank’s Q4 2022 report indicated a $1 billion net loss attributable to shareholders, something the financial institution blamed for a “transformational shift” in the crypto industry which led to a “crisis of confidence across the ecosystem.”
Last year, the bank also announced a planned reduction in digital asset banking deposits.
The news of Signature Bank facing a class-action lawsuit comes hot on the heels of a group of American senators, including the long-time crypto critic Elizabeth Warren, taking aim at another crypto-friendly bank, Silvergate.
In a letter to CEO Alan Lane, the lawmakers alleged that the crypto bank's dealings with FTX "further introduced crypto market risk into the traditional banking system," demanding Silvergate provide more information on the matter.