Silvergate shares plunge 49% after delay in SEC filing

On March 2, Silvergate Capital Corporation’s market capitalization collapsed by 48.82% amid news of a delay in publishing its annual report for the the delay in publication of the annual report for the SEC. The company said it would take “additional time” to complete the audit.

The company also cited “a number of circumstances” that affected its ability to file the documentation on time. Specifically, it noted sales of investment securities “beyond what was previously expected and disclosed in the company’s earnings report.” Another factor was new bond issuances in January and February 2023. Silvergate said it intends to record losses on them.

Write‑downs on securities could negatively affect the capital adequacy of both Silvergate Bank and its parent, Silvergate Capital Corporation.

The filing notes that the organization “is currently reviewing certain regulatory and other requests, as well as investigations concerning its operations.”

The bank’s management is “in the process of reassessing its business and strategies in light of the challenges it has faced.”

On March 2 it also emerged that Coinbase dropped Silvergate for Prime customers. The exchange had been cooperating with the bank in the context of servicing Prime customers.

Over the last six months, Silvergate Capital Corporation’s shares have fallen by 92.1%.

For the quarter ended December 31, 2022, the loss of the digital-asset-focused institution amounted to $1.05 billion.

The deterioration of the operating environment was driven by the collapse of FTX, which had been a client of the bank.

The company also faced funding access issues as it sought to reduce its reliance on the Federal Home Loan Banks.

In the latest reporting period the bank recorded a deposit outflow and took a series of steps to maintain liquidity. The company initially tapped wholesale funding, then sold debt securities.

Moody’s downgraded the rating of Silvergate Bank from Ba3 to B2, citing deterioration in its baseline credit assessment of the financial institution.

In November, Silvergate said that on the trading platform less than 10% of its deposits were held. The bank also disclosed the volume of client deposits on accounts undergoing bankruptcy proceedings of the BlockFi platform — they did not exceed $20 million.

In February 2023, Bloomberg reported that the U.S. Department of Justice’s Fraud Section is investigating Silvergate’s deals with the FTX platform and the associated Alameda Research hedge fund.

The company is listed in the list of creditors of the bankrupt Bitcoin exchange.

Earlier, Senators Elizabeth Warren, John Kennedy and Roger Marshall asked Silvergate CEO Alan Lane to provide detailed information about the bank’s ties to FTX.

In late 2022, Silvergate was sued in a class-action lawsuit over its alleged role in transferring user deposits from FTX to Alameda Research.

In January 2023, U.S. federal prosecutors seized more than $6 million held on three accounts at Silvergate, opened in the name of the Bahamian subsidiary of the exchange FTX Digital Markets.

Recently, Binance transferred over $400 million from accounts opened by its U.S. subsidiary with the crypto firm Merit Peak, founded by Binance CEO Changpeng Zhao.

Refrain from using Silvergate’s services for its clients was also urged by the LedgerX platform management.