Just two days after the US Securities and Exchange Commission abolished a 52-year-old settlement policy, former Silvergate Bank chief risk officer Kate Fraher broke her silence on a 2024 enforcement action, claiming she only settled to avoid a costly court battle.
"The process itself is designed to apply maximum pressure, and the human costs are real," Fraher said in a May 20 statement on X. "I was personally de-banked and had credit lines summarily closed—an aggressive tactic used to disrupt daily life and force compliance."
Fraher agreed to a $250,000 civil penalty and a five-year ban from serving as a public company officer or director to settle SEC charges of misleading investors. She now asserts the crypto-friendly bank's voluntary closure in early 2023 was not due to a bank run after FTX's collapse, but because "broader administrative and regulatory pressure... made operating a viable business impossible."
Fraher's statement is one of the first public tests of the SEC's May 18 decision to rescind its "no-deny" policy. The rule, in place since 1972, barred defendants from publicly denying the agency's allegations as a condition of settling. The change means thousands of individuals and firms who previously signed such agreements can now speak out without fear of the SEC reopening their cases.
The SEC's rescission of Rule 202.5(e) on May 18, 2026, marked an abrupt end to a policy that critics, including SEC Commissioner Hester Peirce, long argued was an unconstitutional infringement on free speech. The agency, which had successfully defended the rule in two circuit courts, abandoned it while a petition for certiorari was pending before the Supreme Court in Powell v. SEC.
In its announcement, the SEC stated the policy may have created a "misimpression" that it was shielding itself from criticism. The Commission confirmed it will not enforce existing no-deny provisions, a move that could open the door for more former defendants like Fraher to contest the SEC's version of events in public.
Fraher's comments revive claims of an unofficial, coordinated effort by US regulators, dubbed "Operation Chokepoint 2.0," to cut crypto firms off from the banking system. She stated that by early 2023, Silvergate had weathered the market volatility from FTX's failure and restructured with sufficient capital to operate safely.
The pressure she alleges made business impossible coincided with the failures of two other crypto-friendly banks, Signature Bank and Silicon Valley Bank, in early 2023. Fraher's narrative, now free from the constraints of her settlement agreement, adds a personal account to the broader industry debate over the regulatory environment for digital assets in the United States.
This article is for informational purposes only and does not constitute investment advice.
