Silvergate Bank Announces Wind Down and Liquidation Plan, Full Repayment of All Deposits
Silvergate Capital Corporation, a La Jolla-based financial establishment that focuses on cryptocurrency, announced Wednesday that it is winding down operations and voluntarily liquidating its bank. All deposits will be fully repaid as part of the bank's wind-down and liquidation plan.
The company is considering the best path forward for resolving claims and preserving the residual value of its assets. Silvergate recently discontinued its Silvergate Exchange Network (SEN), an instant funds transfer system that was one of its key services, and all other deposit-related services remain operational as the company works through its wind-down process.
The collapse of Silvergate is a rare example of crypto’s volatility spilling into the mainstream banking system. Senator Elizabeth Warren called the failure “disappointing, but predictable,” and called for regulators to “step up against crypto risk.”
The stock of Silvergate has dropped 97% since its peak in November 2021, a decrease that mirrors the overall crypto industry. The bank is a traditional, federally insured lender that positioned itself as a gateway to the digital asset space, and its failure is the latest in a string of failures among prominent crypto-related companies that is fueling calls for greater regulation of digital assets.
In January of 2022, Silvergate reported a net loss of approximately $1 billion for the fourth quarter, attributable to common shareholders. Silvergate experienced losses of $718 million when it liquidated its balance sheet debt (sold debt securities) in order to meet customers' withdrawal requests.
Silvergate has hired Centerview Partners as financial adviser and Cravath, Swaine & Moore LLP as legal adviser. Major crypto firms such as Coinbase, Galaxy Digital, Circle, and Paxos have stopped accepting or initiating payments to or from Silvergate.
The woes of Silvergate began in late 2022, following the collapse of FTX and the cans of worms it opened in the crypto industry. Lately, the woes have worsened as Silvergate revealed in a filing with the US Securities and Exchange Commission (SEC) that its annual 10-K report would be delayed. This raised immediate concerns about the financial state of the crypto-friendly bank.
Silvergate Bank's plan for liquidation includes full repayment of all deposits, as per their statement on Wednesday.
0. “Silvergate Contrarian Bet Soured for Peter Thiel-Backed Block.one, Bill Miller” Yahoo News, 9 Mar. 2023, https://news.yahoo.com/silvergate-contrarian-bet-soured-peter-011437091.html
1. “Silvergate Capital Corporation Announces Intent to Wind Down Operations and Voluntarily Liquidate Silvergate Bank” Business Wire, 8 Mar. 2023, https://www.businesswire.com/news/home/20230308005795/en/Silvergate-Capital-Corporation-Announces-Intent-to-Wind-Down-Operations-and-Voluntarily-Liquidate-Silvergate-Bank
2. “Silvergate Capital To Shut Down, Liquidate Crypto-Friendly Silvergate Bank” Investor's Business Daily, 8 Mar. 2023, https://www.investors.com/news/si-stock-silvergate-capital-to-shut-down-liquidate-crypto-friendly-silvergate-bank/
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