Silvergate to liquidate Silvergate Bank

Silvergate Capital Corporation, the holding company for Silvergate Bank, announced plans to wind down operations and liquidate the bank.

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of the bank’s operations and voluntary liquidation is the best way forward,” the company said in a statement.

The plan calls for full reimbursement of deposits. The firm is also exploring ways to best settle claims and preserve residual asset value, including its own technologies.

Centerview Partners LLC acts as financial adviser. Legal counsel is provided by Cravath, Swaine & Moore LLP, and Strategic Risk Associates provides investment-management services.

Silvergate reminded that on March 3 it also announced the termination of its payment network, SEN. However, other deposit-related services will continue to operate during the wind-down.

“As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole, and regulators should step up against crypto risk.”

— Elizabeth Warren.

As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.

— Elizabeth Warren (@SenWarren) March 8, 2023

According to her, regulators should take action against crypto-related risks. Her colleague, Sherrod Brown, expressed a similar view.

In response to his remarks, Caitlin Long, founder and CEO of Custodia (formerly Avanti), noted that the bank’s problem was not cryptocurrencies but a cash gap between demand deposits ($13.3 billion) and cash on hand ($1.4 billion).

.@SenSherrodBrown, you’re wrong that #crypto triggered Silvergate’s issue. What did it was $13.3bn in demand deposits that depositors cld withdraw in minutes, but only $1.4bn of cash. Had $SI held $13.3bn of cash, the bank run wouldn’t have impaired its capital. Not a crypto… https://t.co/nGlfHwUcBN

— Caitlin Long ?⚡️? (@CaitlinLong_) March 8, 2023

In February, it emerged that the U.S. authorities investigate the link between Silvergate Bank and the victims of the collapse of FTX and Alameda Research. Moody’s downgraded the institution’s rating due to a shrinking baseline credit assessment.

On March 2, Silvergate Capital Corporation delayed the publication of its annual report with the SEC. This led to a sell-off in the company’s shares and sparked rumors about the solvency of the subsidiary bank.

Major crypto firms such as Tether, Galaxy Digital, Paxos, Gemini, Coinbase and Bakkt distanced themselves from the institution.

In the wake of the bank’s liquidation announcement, Marathon Digital Holdings said it would repay its $50 million term loan from Silvergate and close its credit line. The firm retrieved 3,132 BTC from collateral, worth about $68 million.

Marathon Digital Holdings has repaid its term loan and terminated its credit facilities with Silvergate Bank, reducing Marathon’s debt by $50 million and increasing the Company’s unrestricted bitcoin holdings by 3,132 BTC. Read our full update here: https://t.co/tihTTagfhR

— Marathon Digital Holdings (NASDAQ: MARA) (@MarathonDH) March 8, 2023

According to reports, banks are ending their cooperation with crypto firms amid concerns about regulatory crackdowns.