Crypto Bank Silvergate Announces ‘Voluntary Liquidation’
Crypto-friendly Silvergate Bank will “voluntarily liquidate” its assets and cease operations, its holding company Silvergate Capital Corp. announced. Wednesday.
The bank was under fire after announcing a week ago that it had to delay filing its annual 10-K report because of questions from independent auditors and accounting firms about the numbers. In Wednesday’s announcement, Silvergate announced that it had engaged Centerview Partners as a financial advisor, law firm Cravath, Swaine and Moore LLP and Strategic Risk Associates for “transition management assistance.” The liquidation will see all deposits repaid in full, the company said.
“In light of the latest developments in the industry and regulations, Silvergate believes that an orderly liquidation of the bank’s operations and a voluntary liquidation of the bank is the best way forward. The bank’s liquidation and liquidation plan includes full repayment of all deposits. The company is also considering how to best resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets,” it said in a press release.
The California Department of Financial Protection and Innovation, the state regulator for the La Jolla, Calif.-based firm, said it is monitoring the situation.
“The department evaluates compliance with all financial laws, as well as safety and soundness obligations, and works closely with relevant federal counterparts,” said DFPI Commissioner Clothilde Hewlett.
In last week’s announcement, Silvergate revealed that it was facing inquiries from banking regulators and the Department of Justice, and warned that its ability to be a “going concern” in the next 12 months could be in doubt.
As a result, major crypto clients announced they would suspend their relationship with the bank, and its share price fell 58% in intraday trading to a record low of $5.72 – down over $115 in the past year. The stock fell further after today’s announcement in after-market trading. Signature Bank, another crypto-friendly bank, saw its own stock fall around 5% in after-hours trading, falling nearly 10% before rebounding slightly.
The bank took out about $4.3 billion in loans from the Federal Home Loan Bank of San Francisco, a federal banking entity that makes these types of loans to banks. Still, the fact that Silvergate’s plight guaranteed those loans should have sparked concern from the FDIC months ago, a banking industry veteran told CoinDesk.
UPDATE (8 March 2023, 21:50 UTC): Adding further details.
