Despite lingering hopes, many may see Silvergate’s decision to initiate a “voluntary liquidation” of its banking operations as an inevitable conclusion. This announcement marks Silvergate as the latest casualty of the FTX’s big bang.
Silvergate Bank’s Dramatic Shutdown
Silvergate’s Banking Branch to Voluntarily Liquidate Following FTX Bankruptcy
Silvergate, weakened and shaken for months following FTX’s bankruptcy, has finally announced the voluntary liquidation of its banking operations via a press release. While the event has been largely anticipated by the crypto industry, it still sends shockwaves through the market, causing significant decline in recent days.
In a bid to reassure customers and creditors, Silvergate has emphasized that the liquidation will be orderly and comply with American regulatory standards. The bank also guarantees the reimbursement or restitution of assets for all customers and creditors.
Despite this, questions remain about the future of assets in bitcoins and other cryptocurrencies held by the bank, leaving the entire crypto market feverish. The shutdown of the Silvergate Exchange Network (SEN) further adds to the uncertainty.
The crypto industry has seen several other victims of FTX’s bankruptcy, with companies like Tether and Circle (Coinbase) distancing themselves from the establishment. Meanwhile, Sam Bankman-Fried, the person behind the mistakes that led to the collapse of FTX, remains preoccupied with his digital leisure, leaving the crypto industry in a state of disrepair.
According to a statement released by the bank, all deposits will be fully repaid as part of the liquidation plan. However, the company did not disclose how it plans to resolve claims against its business. The bank will be advised by Centerview Partners while Cravath, Swaine & Moore will provide legal services. The liquidation announcement comes less than a week after Silvergate discontinued its payments platform, Silvergate Exchange Network (SEN), one of its core offerings. The company clarified that all other deposit-related services remain operational as it winds down, and customers will be notified of any further changes.
The delay of the annual 10-K filing for 2022 was due to the viability of its business amid imminent regulatory crackdowns, according to Silvergate. The company faces investigations from banking regulators, including the Federal Reserve and the California Department of Financial Protection and Innovation, as well as congressional inquiries. Last week, the bank warned of its uncertainty in staying in business, leading crypto companies like Coinbase and Galaxy Digital to cut ties with Silvergate.
The bank has been struggling for months, with the firm reporting a nearly $1 billion net loss in the fourth quarter of 2022 following a rush for the exits at the end of last year that saw customer deposits plummet by 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion of debt securities, and the firm went to the Federal Home Loan Bank for an additional $4.3 billion. Lawmakers like Sen. Elizabeth Warren have scrutinized the loan, saying it “further introduced crypto market risk into the traditional banking system.”
Investment firms Citadel Securities and BlackRock recently purchased major stakes in Silvergate, acquiring 5.5% and 7%, respectively. The voluntary liquidation marks the end of Silvergate’s foray into cryptocurrency banking, which saw it positioned as one of the few US banks catering to the sector.
DISCLAIMER
Investments in cryptocurrencies are risky. How-then is not responsible for the quality of the products or services presented on this page and could not be held responsible, directly or indirectly, for any damage or loss caused following the use of a good or service highlighted in this article. Investments related to crypto-assets are risky by nature, readers should do their own research before taking any action and only invest within the limits of their financial capabilities. This article does not constitute investment advice.
AMF recommendations. There is no guaranteed high return, a product with high return potential involves high risk. This risk-taking must be in line with your project, your investment horizon and your ability to lose part of this savings. Do not invest if you are not ready to lose all or part of your capital.
0 Comments