Silvergate Bank Announces Wind Down and Liquidation of Bank
The crypto industry’s recent meltdown has taken its toll on Silvergate Bank, with the company announcing plans to wind down operations and liquidate the bank on Wednesday. Silvergate said in a statement that the best path forward was an orderly wind down of bank operations and a voluntary liquidation of the bank.[0] The bank’s liquidation plan includes full repayment of all deposits.[1]
Silvergate is renowned for being the bridge between the crypto world and traditional banking, providing payment infrastructure.[2] The company’s decision to wind down is due to “recent industry and regulatory developments.” It has also discontinued the Silvergate Exchange Network (SEN), a platform launched in 2018 that enabled investors and institutions to transfer U.S. dollars from bank accounts to crypto exchanges.[3] All other deposit-related services will remain operational as the company works through its wind-down process.[3]
The company has seen its stock plunge 97% from its November 2021 high.[4] This reflects the broader crypto market’s decline, with a string of bankruptcies and scandals in 2022, including the implosion of Sam Bankman-Fried’s business empire, sending the crypto industry into a tailspin.[5]
In January, Silvergate reported a net loss of nearly $1 billion for the fourth quarter of 2022.[6] To keep up with customers’ withdrawals, Silvergate liquidated its balance sheet debt, resulting in a loss of $718 million.[2] These losses have led to concerns that the bank may not be well-capitalized.[2]
In addition to Silvergate, other crypto-related companies have been affected by the downturn in digital assets, with Coinbase, Galaxy Digital, Circle and Paxos all cutting ties with the bank this week.
Senator Elizabeth Warren expressed her disappointment in the failure of Silvergate, predicting that such an outcome was likely, and further urged regulators to take action against the potential risks associated with cryptocurrencies.[7] Silvergate's failure is yet another in a series of catastrophes for well-known crypto-based businesses, prompting pleas for increased oversight of digital assets.[5]
Centerview Partners LLC has been appointed as financial advisor, with Cravath, Swaine & Moore LLP acting as legal advisor and Strategic Risk Associates providing transition project management assistance.[1] Short sellers are making a fortune by loading up on bets against the bank, though customers must be made whole and regulators should step up against crypto risk.[8]
0. “Bitcoin Dives Below $22,000 As Crypto-Friendly Bank Silvergate Prepares to Shut Down” The Daily Hodl, 9 Mar. 2023, https://dailyhodl.com/2023/03/08/bitcoin-dives-below-22000-as-crypto-friendly-bank-silvergate-prepares-to-shut-down/
1. “Silvergate Capital plans to wind down its crypto-friendly bank; stock tanks” MarketWatch, 8 Mar. 2023, https://www.marketwatch.com/story/silvergate-capital-shares-tank-after-company-announces-plan-to-wind-down-bank-51618e7c
2. “Silvergate Capital: The Latest Crypto Casualty (NYSE:SI)” Seeking Alpha, 9 Mar. 2023, https://seekingalpha.com/article/4585876-silvergate-capital-latest-crypto-casualty
3. “Silvergate Capital Corporation Announces Intent to Wind Down Operations and Voluntarily Liquidate Silvergate Bank” Business Wire, 8 Mar. 2023, https://www.businesswire.com/news/home/20230308005795/en/Silvergate-Capital-Corporation-Announces-Intent-to-Wind-Down-Operations-and-Voluntarily-Liquidate-Silvergate-Bank
4. “Crypto Startups Scramble to Find Banks After Silvergate Meltdown” The Information, 7 Mar. 2023, https://www.theinformation.com/articles/crypto-startups-scramble-to-find-banks-after-silvergate-meltdown
5. “Crypto-friendly lender Silvergate collapses” CNN, 9 Mar. 2023, https://www.cnn.com/2023/03/08/business/silvergate-winds-down-crypto/index.html
6. “Silvergate Capital shares drop 57% after the crypto bank delays its annual report” CNBC, 2 Mar. 2023, https://www.cnbc.com/2023/03/02/silvergate-capital-shares-crater-after-the-crypto-bank-delays-annual-report.html
7. “Silvergate downfall sparks debate over whose fault it actually was” Cointelegraph, 9 Mar. 2023, https://cointelegraph.com/news/silvergate-downfall-sparks-debate-over-whose-fault-it-actually-was
8. “Silvergate Short Bets Amass $780 Million Payday as Crypto Bank Sinks” Yahoo News, 8 Mar. 2023, https://news.yahoo.com/silvergate-short-bets-amass-780-163940609.html
