Citadel Securities invests in the defunct crypto bank Silvergate
Ken Griffin’s Citadel Securities reported a 5.5% stake, or 1.73 million shares, in cryptocurrency-focused lender Silvergate Capital Corp as of Dec. 31, according to a regulatory filing.
Silvergate Capital jumped Wednesday afternoon after the market maker disclosed the investment in a regular filing with the US Securities and Exchange Commission. The stake, worth around $25 million, was a result of Citadel Securities’ market making operations, rather than a directional investment in the beleaguered crypto banker.
The announcement comes shortly after the world’s largest asset manager, BlackRock, disclosed a significant position in Silvergate. The disclosure showed that BlackRock increased its stake to 7.2%, up from about 5.9% a year earlier, causing a significant move in Silvergate stock.
Other Wall Street firms, including custodian bank State Street, reported significant stakes in Silvergate earlier this month. It apparently increases investors’ confidence in the bank, which has struggled in the wake of the FTX collapse.
Despite the recent gains, Silvergate stock is still down nearly 20% year to date. They are also down about 87% when weighed against the peak it reached near $220 in 2022. A massive sell-off occurred earlier this month after the three-branch local lender reported a drop in deposits and announced a delay for a major stablecoin project .
Adding to the pain, Silvergate’s payments network, which allows crypto exchanges and other customers to instantly transfer funds, saw activity drop 41% in the quarter. The California-based company has grown its deposits from less than $1 billion in 2013 to over $13 billion, mainly through providing banking services to crypto companies.
Silvergate, which trades under the ticker (NYSE: $SI), also allows its customers to get loans in US dollars secured by their bitcoin holdings on some crypto exchanges it serves.
Despite the crypto winter, Citadel Securities has increased its exposure to digital assets and blockchain technology. Earlier last year, it teamed up with US electronic market maker Virtu Financial, as well as other brokers to launch a cryptocurrency trading ecosystem.
The alliance will allow brokerages to offer crypto executions to their consumers. However, the initiative is still in its early development phase, and the partners are monitoring regulatory reactions. Ahead of the official launch of the crypto trading marketplace, Citadel Securities expects more wealth managers and other industry leaders to join the crypto-focused alliance.
