Crypto Bank Silvergate Will Shut Down Amid Financial Peril


Topline

California crypto banking giant Silvergate Capital announced Wednesday it is ending operations and liquidating its Silvergate Bank, sending its stock price plummeting, following a months-long downward spiral for the embattled crypto lender.

Key Facts

Silvergate, one of the biggest banks dealing in cryptocurrency, voluntarily began liquidation Wednesday, the state’s Department of Financial Protection and Innovation announced.

The company said in a statement it believes an “orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” adding that the plan “includes full repayment of all deposits.”

The announcement sent the bank’s share price to a record low, falling 5.76% Wednesday to $4.91, marking a 71.56% drop from the beginning of the year.

Silvergate’s stocks have been steadily falling for over a year, and came crashing less than a week after several major crypto companies—including Circle, Coinbase and Paxos—announced they would end their relationships with Silvergate, blaming the bank’s delay on a financial filing and its admission it was concerned about its future.

Key Background

Silvergate, which was founded in 1988, became a prominent figure in the blossoming crypto market by taking on clients early into the crypto boom and bringing its crypto assets to $2.1 billion in September 2020—though it slowly became exposed to the loosely-regulated market’s vulnerabilities. On January 5, its stock price dropped 40% after the company confirmed in a quarterly report its customers had withdrawn $8.1 billion between September and December—a decline that coincided with the high-profile collapse of one of its clients, FTX. It said in a regulatory filing last week it was “less than well-capitalized,” leading shares to fall another 57% between March 1 and March 3, from $13.53 to $5.77. Last week, the bank also announced it had shut down its 24/7 instant payment network, Silvergate Exchange Network, while keep “all other deposit-related services” running, and unveiled plans in a filing last week to lay off 40% of its workforce in a move targeting roughly 200 employees, amid “recent turmoil” and as the “digital asset industry underwent a transformational shift.”

Tangent

Silvergate is also being investigated by the Justice Department over its dealings with FTX and its sister trading firm Alameda Research, although the bank has not been accused of fraud or any wrongdoing, Bloomberg reported, citing sources familiar with the matter.

Big Number

98%. That’s how far Silvergate’s share price has fallen from its November 2021 peak of $219.75.

Further Reading

Silvergate Bank Extends Downward Spiral After U.S. Criticism Spurs Losses (Forbes)

Silvergate Stock Crashes Over 40% As Bank Grapples With Crypto Crisis (Forbes)

Silvergate Takes $586 Million In Cryptocurrency Deposits (Forbes)

Latest Crypto Collapse: Bitcoin And Ethereum’s Losses Top $24 Billion As Silvergate Unravels (Forbes)



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