U.S. prosecutors probe Silvergate's dealings with FTX, Alameda -source

(Reuters) - Federal prosecutors in Washington are probing Silvergate Capital Corp and its dealings with bankrupt crypto exchange FTX and Alameda Research, according to a source familiar with the investigation.

Prosecutors in the Justice Department's fraud section are involved in the criminal probe into the crypto-focused bank's dealings, the source said. Scrutiny of Silvergate has been mounting in the wake of FTX's collapse. Earlier this week, a bipartisan group of U.S. senators sent a letter to Silvergate asking for details of its risk management practices and its dealings with FTX.

A spokesperson for the Justice Department declined to comment. Silvergate Capital, based in La Jolla, California, did not immediately respond to Reuters requests for comment.

Bloomberg News first reported the criminal probe. Silvergate has not been accused of any wrongdoing and the inquiry, which is in its early phases, could end without charges being brought, Bloomberg said, citing people familiar with the matter.

The criminal investigation is examining Silvergate's hosting of accounts tied to FTX founder Sam Bankman-Fried's businesses, the report said.

In January, the crypto-focused bank reported a net loss of $1 billion in the fourth quarter, after investors spooked by FTX's collapse pulled out more than $8 billion in deposits.

(Reporting by Chris Prentice in New York and Manya Saini in Bengaluru; Editing by Devika Syamnath and Leslie Adler)