Days after FTX’s spectacular collapse, Signature Bank was doing damage control, trying to play down its exposure to the crypto exchange’s alleged fraud.
The bank, an important real estate lender in the New York metro area, assured investors just 0.1 percent of its deposits were linked to FTX.
Turns out, there was more to the story.
A lawsuit filed Monday alleges that the major multifamily lender not only knew about FTX’s fraudulent behavior but helped it along.
A refresher on the FTX debacle: Sam Bankman-Fried, the exchange’s founder, stands accused of funneling customer deposits into bank accounts controlled by another firm he owned, Alameda Research, then embezzled from them.
Signature’s digital payment platform Signet let customers deposit cash in exchange for tokens — one-to-one digital representations of those dollars. This cemented Signature as one of the most crypto-friendly banks in the U.S., according to the suit.
In the 87-page complaint, algorithmic trading firm Statistica Capital claims Signature recognized “suspicious fund transfers through Signet,” but processed them anyway, including ones Statistica said were expressly for FTX but which Signature allowed to be transferred to Alameda.
The firm adds that Signature “substantially facilitated the FTX fraud” by continuing to accept more customer deposits into Alameda accounts after learning of the fraud and by publicly promoting FTX.
Statistica further asserts that Signature, in carrying out due diligence, would have known that there was no separation between Alameda and FTX, that FTX was misappropriating customer funds and that the source of Alameda and FTX’s venture capital was customer money.
The scheme fell apart when FTX’s digital currency became worthless. The lawsuit addresses Signature’s exposure to FTX’s collapse, citing that the 0.1 percent of deposits tied to the company represented $100 million of customer funds.
Statistica claims the fraud cost it about $2 million. The firm is vying for class-action certification for the suit.
Neither Statistica’s counsel nor a Signature spokesperson immediately responded to a request for comment.
It’s unclear if the lawsuit will have any impact on Signature’s customers, which include many New York apartment building owners.
Seizing on CEO Joseph DePaola’s claim during a January earnings call that the bank was duped in a “Bernie Madoff-like situation,” the lawsuit highlights other times Signature has been linked in some way to money laundering, Ponzi schemes and fraud.
Read more
It cites Signature’s connection to a Ponzi scheme by money manager William Landberg, who pleaded guilty. Investors sued Signature in 2016 after it lost $66 million of their money, alleging the bank knew about the scheme and helped Landberg cover it up.
During discovery, the plaintiffs uncovered documents that they claimed showed Signature disregarding its duty to prevent money laundering. But the case was dismissed on statute-of-limitations and jurisdictional grounds.
The new complaint also cites that in late 2019, Chinacast sued Signature and two other banks, alleging they let the Chinese education company’s former CEO embezzle $35 million.