Crypto Bank Silvergate Will Shut Down Due to Financial Peril
Updated March 8, 2023 at 6:28 PM EST
Top line
California crypto-banking giant Silvergate Capital announced on Wednesday that it is winding down operations and liquidating Silvergate Bank, sending its stock price tumbling, following a months-long downward spiral for the struggling crypto lender.
Keywords
Silvergate, one of the largest banks dealing in cryptocurrency, began voluntary liquidation on Wednesday, the state’s Department of Financial Protection and Innovation announced.
The company said in a statement that it believes an “orderly liquidation of the bank’s operations and a voluntary liquidation of the bank is the best way 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% on Wednesday to $4.91, marking a 71.56% year-to-date decline.
Silvergate’s shares have fallen steadily for over a year, 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 admitted that it was worried about the future.
Key background
Founded in 1988, Silvergate became a prominent figure in the booming crypto market by taking on clients early in the crypto boom and bringing its crypto assets to $2.1 billion in September 2020 – although it slowly suffered from the vulnerabilities of the loosely regulated market. On January 5, its share price fell 40% after the company confirmed in a quarterly report that customers had withdrawn $8.1 billion between September and December – a decline that coincided with the high-profile collapse of one of its customers, FTX. It said in a regulatory filing last week that it was “less than well capitalized,” causing 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 payments network, the Silvergate Exchange Network, while keeping “all other deposit-related services” running, and unveiled plans in a filing last week to lay off 40% of the bank’s workforce in a move targeting approximately 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 for its ties to 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 US Criticism Spurs Loss (Forbes)
Silvergate stock crashes over 40% as bank battles crypto crisis (Forbes)
Silvergate Takes $586M in Cryptocurrency Deposits (Forbes)
Latest Crypto Collapse: Bitcoin and Ethereum’s Losses Top $24 Billion as Silvergate Dissolves (Forbes)
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