Kate Fraher, former chief risk officer at Silvergate, revealed that she chose to settle with the U.S. Securities and Exchange Commission (SEC) in 2024 to avoid a lengthy legal battle over accusations of misleading investors about the bank’s anti-money laundering (AML) policies and crypto customer oversight. She emphasized that no regulator proved Silvergate’s AML controls had failed, but she decided to settle in order to move forward with her life and career.
Under the settlement, Fraher agreed to pay a civil penalty of $250,000 and accepted a five-year ban from serving as a corporate executive or board member. Fraher described the enforcement process as one designed to exert intense pressure on individuals, noting that she was effectively cut off from banking services and had her credit lines abruptly closed, tactics she said were used to force compliance by disrupting daily life.
The former executive’s comments shed new light on Silvergate’s decision to wind down operations, which occurred after the collapse of cryptocurrency exchange FTX in late 2022. Contrary to popular narratives that the shutdown was triggered by a bank run or market volatility linked to FTX, Fraher stated the bank voluntarily ceased operations because ongoing administrative and regulatory pressures made it impossible to sustain a viable crypto banking business.
Industry observers have called these regulatory efforts “Operation Chokepoint 2.0,” describing a campaign by U.S. financial regulators to cut off banking services to crypto firms, thereby limiting their ability to function within the broader financial ecosystem. Silvergate was not alone—Signature Bank and Silicon Valley Bank also shuttered in early 2023 due to liquidity challenges spurred by deposit withdrawals and fallout from FTX and several failed crypto lending platforms.
Despite surviving the initial FTX crisis by restructuring its capital and workforce to maintain viability in early 2023, Silvergate ultimately found the intensifying regulatory environment unsustainable. Fraher credited the SEC’s current leadership under Paul Atkins for rescinding the longstanding gag rule that had prevented her from publicly discussing the settlement. She condemned the gag rule as unconstitutional and welcomed the restoration of the right to speak openly about regulatory enforcement’s significant personal and professional toll.