Crypto Lender Silvergate Collapses, Says Will Voluntarily Liquidate Bank

Silvergate, a California-based bank, known for its Crypto-focused lending, on Wednesday said that it is winding down operations and will voluntarily liquidate the Bank

Silvergate, a California-based bank known for its crypto-focussed lending, on Wednesday said that it is winding down operations and will voluntarily liquidate the Bank. According to the company statement, the move has been made "in light of recent industry and regulatory developments.”

Silvergate said, “Silvergate Capital Corporation, the holding company for Silvergate Bank, today announced its intent to wind down operations and voluntarily liquidate the Bank in an orderly manner and in accordance with applicable regulatory processes. In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of Bank operations and a voluntary liquidation of the Bank is the best path forward.”

The company also added that the Bank’s wind-down and liquidation plan includes “full repayment of all deposits.” The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets, the statement said.

After the announcement, the Californian Bank’s stock price dropped by approximately 44 per cent on Wall Street, reported Business Lend. 

Many of the major cryptocurrency companies resorted to Silvergate’s financing since traditional banks were reluctant to work with them due to regulators' concerns. However, after the US Department of Justice opened an investigation against the bank in relation with the former CEO of collapsed crypto exchange FTX Sam Bankman-Fried, thing started to go southwards.

In its filing document on March 1, the crypto-friendly bank said that it "is currently analysing certain regulatory and other inquiries and investigations that are pending."

After the company announced it will review its accounts books and conduct an audit, multiple clients have already left and the ones who have not left are planning to leave the company as soon as possible. 

In 2013, Silvergate turned into a crypto financial institution. In 2019, the company made its IPO, promising an entire refocus on the business. As of September 30 last year, Silvergate had $11.9 billion in digital property held in custody, reported Business Lend. 

But with the collapse of FTX in November last year, the bank reported $3.8 billion in digital property held in custody as of December 31, the report said. FTX was one of all Silvergate’s big clients. 

However, Dave Weisberger, the CEO of CoinRoutes told CNN, “The problems that faced Silvergate were primarily a result of less-than-adequate risk management, notably one of relying too much on volatile short-term deposits while lending or investing at a longer duration…This is not like the collapse of FTX, where investors lost their deposits, but, rather, an orderly dissolution.”

Silvergate’s stock has fallen 97 per cent from its November 2021 high. A string of bankruptcies and scandals in 2022, including FTX collapse, has left the crypto industry reeling. Once valued at $3 trillion, the entire market is now worth about $1 trillion.

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