Former Silvergate Capital Corp. Chief Risk Officer Kate Fraher this week publicly criticized the Securities and Exchange Commission's tactics in an anti-money laundering enforcement case, speaking out after a court-ordered gag rule was lifted. The remarks offer a rare insider critique of how federal regulators handle crypto-focused banks and underscore the ongoing tension between the industry and its watchdogs.
A gag rule lifted
The gag rule had barred Fraher from discussing the SEC's actions in the AML case. Its repeal earlier this month opened the door for her to comment on the agency's approach. Silvergate, once a leading crypto-friendly bank, collapsed in 2023 after the FTX implosion, and the SEC's enforcement case has been a lingering legal battle for its former executives.
Fraher's criticism
Fraher didn't mince words. She argued that the SEC's enforcement tactics in the AML matter were overzealous and failed to account for the unique compliance challenges crypto banks face. While she didn't offer specifics on the case itself, her public stance is a direct challenge to the agency's narrative. The timing isn't great for the SEC, which has faced mounting scrutiny over its regulatory approach to digital assets.
Crypto banking under fire
The criticism shines a light on the broader regulatory squeeze on crypto banking. Since Silvergate's failure, few traditional banks have been willing to serve crypto clients, and the few that remain operate under constant legal pressure. Fraher's comments could embolden other former executives to speak out, but they also risk further souring already tense relations between regulators and the industry.
The AML enforcement case against Silvergate's former leadership is still pending. Fraher's public break with the SEC may complicate settlement talks or even prompt a response from the agency. For now, the crypto banking sector is left wondering whether this criticism will lead to any real change in how regulators handle AML enforcement — or just become another chapter in a long, bitter standoff.
