The criminal investigation that has enveloped the now-bankrupt cryptocurrency exchange FTX continues to spread its scope. Prosecutors in the Justice Department are reportedly investigating Silvergate, a crypto-focused bank, for hosting accounts connected to FTX’s disgraced founder, Sam Bankman-Fried, according to Bloomberg.
The probe is in its initial stages and hasn’t led to any criminal accusations, sources familiar with the matter told Bloomberg. The prosecutor’s inquiry also encompasses other businesses linked to Bankman-Fried beyond FTX, including Alameda Research.
Representatives for Silvergate and the Justice Department declined to comment when reached by Fortune. After reports of the Justice Department’s investigation were published Thursday afternoon, Silvergate’s stock price crashed 28% in after-hours trading.
The investigation, which started weeks ago, broaches the culpability of the banks that helped sustain Bankman-Fried’s crypto empire, which the federal government alleges was built via a yearslong effort to cheat customers and investors.
It also furthers the sudden decline of Silvergate, which tied its fortunes to the meteoric rise of the cryptocurrency industry. Now, during the prolonged Crypto Winter, the bank is flailing. It reported a net loss of $1 billion in the fourth quarter of 2022 and recently laid off 40% of its staff. And the Wall Street Journal reported that both it and Signature, another crypto-focused bank, have borrowed billions of dollars from home-loan banks to cover shortfalls as crypto giants like FTX were felled.
Founded in 1988 in California, Silvergate positioned itself as a key player in crypto. As of mid-January, it said it served over 1,300 digital currency and fintech companies, per an archived version of its investors page. Coinbase, Binance, and other exchanges used the bank, for example, to exchange U.S. dollars between each other in what’s called the Silvergate Exchange Network. And at the end of September, over 90% of the bank’s deposit base was from digital asset customers, amounting to almost $12 billion, according to the Washington Post.
However, the bank’s bet on the crypto industry went sour in 2022 as companies other than just FTX, including Celsius and BlockFi, declared bankruptcy. Following FTX’s dramatic fall, Senators Elizabeth Warren (D-Mass.), John Kennedy (R-La.), and Roger Marshall (R-Kans.) wrote to Silvergate’s CEO, Alan Lane, requesting information about its involvement with FTX and Alameda.
“The public is owed a full accounting of the financial activities that may have led to the loss of billions in customer assets,” the senators wrote, “and any role that Silvergate may have played in these losses.”
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