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.[0] 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.[1] 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.[2]
The collapse of Silvergate is a rare example of crypto’s volatility spilling into the mainstream banking system.[3] Senator Elizabeth Warren called the failure “disappointing, but predictable,” and called for regulators to “step up against crypto risk.”[4]
The stock of Silvergate has dropped 97% since its peak in November 2021, a decrease that mirrors the overall crypto industry.[0] 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.[3]
In January of 2022, Silvergate reported a net loss of approximately $1 billion for the fourth quarter, attributable to common shareholders.[5] Silvergate experienced losses of $718 million when it liquidated its balance sheet debt (sold debt securities) in order to meet customers' withdrawal requests.[6]
Silvergate has hired Centerview Partners as financial adviser and Cravath, Swaine & Moore LLP as legal adviser.[7] Major crypto firms such as Coinbase, Galaxy Digital, Circle, and Paxos have stopped accepting or initiating payments to or from Silvergate.[5]
The woes of Silvergate began in late 2022, following the collapse of FTX and the cans of worms it opened in the crypto industry.[6] 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.[6] This raised immediate concerns about the financial state of the crypto-friendly bank.[8]
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/
3. “Crypto-friendly lender Silvergate collapses” CNN, 9 Mar. 2023, https://www.cnn.com/2023/03/08/business/silvergate-winds-down-crypto/index.html
4. “Silvergate downfall sparks debate over whose fault it actually was” Cointelegraph, 9 Mar. 2023, https://cointelegraph.com/news/silvergate-downfall-sparks-debate-over-whose-fault-it-actually-was
5. “Silvergate Capital shares drop 57% after the crypto bank delays its annual report” CNBC, 2 Mar. 2023, https://www.cnbc.com/2023/03/02/silvergate-capital-shares-crater-after-the-crypto-bank-delays-annual-report.html
6. “Silvergate Capital: The Latest Crypto Casualty (NYSE:SI)” Seeking Alpha, 9 Mar. 2023, https://seekingalpha.com/article/4585876-silvergate-capital-latest-crypto-casualty
7. “Silvergate Capital plans to wind down its crypto-friendly bank; stock tanks” MarketWatch, 8 Mar. 2023, https://www.marketwatch.com/story/silvergate-capital-shares-tank-after-company-announces-plan-to-wind-down-bank-51618e7c
8. “Crypto Bank Silvergate to Shut Down and Liquidate, after FDIC Examiners Show up. Shares Collapse Entirely” WOLF STREET, 9 Mar. 2023, https://wolfstreet.com/2023/03/08/crypto-bank-silvergate-to-shut-down-and-liquidate-after-fdic-examiners-show-up-shares-collapse-entirely
