Silvergate Bank, which respects cryptocurrencies, will “voluntarily liquidate” its assets and cease operations, its holding company, Silvergate Capital Corp, announced on Wednesday. (WHETHER).
The bank was under fire after announcing a week ago that it would have to delay filing its annual 10-K report due to questions from its independent auditors and accounting firm about its numbers. In Wednesday’s announcement, Silvergate Corp. announced that it had retained Centerview Partners as financial advisor, law firm Cravath, Swaine and Moore LLP and Strategic Risk Associates for “transition management assistance”. As part of the liquidation, all deposits will be fully refunded, the company said.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly liquidation of the Bank’s operations and a voluntary liquidation of the Bank is the best course of action. The Liquidation and Liquidation Plan of “The Bank includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets,” Silvergate Corp. said in a statement. A press release.
The California Department of Financial Protection and Innovation, the state regulator for the La Jolla, Calif.-based company, said it is monitoring the situation.
“The Department assesses compliance with all financial laws, as well as security and soundness obligations, and works closely with relevant federal counterparts,” said DFPI Commissioner Clothilde Hewlett.
A White House spokesperson referred CoinDesk to press secretary Karine Jean-Pierre’s remarks that the presidential administration had been monitoring the situation since earlier this week. At the time, Jean-Pierre said President Joe Biden would continue to urge Congress to take action on crypto issues.
In a statement, Senate Banking Committee Chairman Sherrod Brown (D-Ohio) said, “As the impact of the FTX collapse continues to ripple outward, today we see this that can happen when a bank is too dependent on a risky and volatile industry like cryptocurrencies I was concerned that when banks get involved in crypto it would spread the risk throughout the financial system and it would be the taxpayers and consumers who pay the price, which is why I continue to work with my colleagues in Congress and financial regulators to establish strong safeguards for our financial system against crypto risks.
Spokespersons for the Federal Deposit Insurance Corp. and the Federal Reserve declined to comment.
In last week’s announcement, Silvergate Bank revealed it was facing demands from banking regulators and the Department of Justice, and warned that its ability to be a “going concern” over the course of 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 holding company’s share price fell 58% in intraday trading to an all-time low of 5.72. $, a drop of more than $115 over the past year. Its stock fell further after Wednesday’s post-shutdown announcement. Signature Bank, another crypto-enabled bank, saw its own shares fall about 5% in after-hours trading, plunging almost 10% before rebounding slightly.
Silvergate has taken out approximately $4.3 billion in loans from the Federal Home Loan Bank of San Francisco, a federal banking entity that provides this type of loan to banks. Still, the fact that Silvergate’s situation warranted these loans should have caused FDIC concern months ago, a banking industry veteran told CoinDesk.
Although Silvergate was not on the FDIC’s list of “failed banks” (because it is voluntarily liquidated, rather than in receivership by the FDIC), it appears to be the first major bank meltdown since October 2020, and possibly the biggest bank to fail since 2009.
UPDATE (March 8, 2023, 21:50 UTC): Add additional details.
UPDATE (March 8, 22:05 UTC): Adds statements from the White House, Senator Sherrod Brown and the FDIC.