Silvergate shuts down operations, liquidates after crypto meltdown
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Silvergate Capital, a key lender to the crypto industry, said Wednesday it is winding down operations and liquidating the bank. The stock plunged more than 36% in after-market trading.
Silvergate has served as one of the two main banks for crypto companies, along with New York-based Signature Bank. Silvergate has just over $11 billion in assets, compared to over $114 billion at Signature. Bankrupt crypto exchange FTX was a major Silvergate customer.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly winding down of the bank’s operations and a voluntary liquidation of the bank is the best way forward,” the company said in a statement.
All deposits will be refunded in full, according to a liquidation plan shared on Wednesday. The company did not say how it plans to resolve claims against the business.
Centerview Partners will act as Silvergate’s financial advisor and Cravath, Swaine & Moore will provide legal services.
The liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network, or SEN, which was considered one of its core offerings. As part of the liquidation announcement, Silvergate clarified that all other deposit-related services will remain operational when the company liquidates. Customers will be notified if further changes occur.
Silvergate said last week it would delay filing its annual 10-K for 2022 while it sorted out the “viability” of the business. The company disclosed that the delayed filing was due in part to an impending regulatory crackdown, including an investigation already underway by the Justice Department.
Silvergate also attributed the delay to congressional inquiries, as well as investigations by banking regulators, which include the Federal Reserve and the California Department of Financial Protection and Innovation.
Crypto companies such as Coinbase and Galaxy Digital rushed to cut ties with Silvergate last week after the bank warned it was unsure whether it could remain in business.
Silvergate has struggled for months. In addition to laying off 40% of its workforce in January, the firm reported a net loss of nearly $1 billion in the fourth quarter following a rush of departures late last year that saw client deposits plunge 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion in debt securities.
The firm went to the Federal Home Loan Bank for another $4.3 billion. That loan drew attention from lawmakers such as Sen. Elizabeth Warren, D-Mass., who said it “further introduced crypto market risk into the traditional banking system.”
The investment companies Citadel Securities and BlackRock recently took large stakes in Silvergate, acquiring 5.5% and 7% respectively.
SEE: Silvergate plunges in premarket trading after delaying annual report
