Crypto carnage continues: After FTX, Silvergate bites the dust, announces liquidation
Crypto carnage continues, Silvergate capital, a central lender to the cryptocurrency industry, has now announced it's shutting down operations and liquidating the bank.
Crypto stocks sank another 36% after the news was announced on Wednesday, sending shockwaves across the cryptocurrency industry.
"In light of recent industry and regulatory developments, Silvergate believes that an orderly wind-down of Bank operations and a voluntary liquidation of the Bank is the best path forward," read a press release from the company.
"The Bank's wind-down and liquidation plan includes full repayment of all deposits."
All deposits would be fully reimbursed, shared the company's statement. However, it does not mention how the bank intended to handle legal actions brought against it.
Silvergate is considering how "to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets," further added the press release.
Silvergate's financial advisor will be Centerview Partners, while its legal counsel will come from Cravath, Swaine & Moore.
Fall of Silvergate
The Silvergate Exchange Network, or SEN, a payments network that was regarded as one of the company's major features, was withdrawn less than a week prior to the liquidation.
Silvergate made it clear in the liquidation statement that all other deposit-related services are still available as the business is shut down. Consumers will be informed if there are any more changes.
Silvergate announced last week that the company would postpone filing its annual 10-K for 2022 while it assessed the "viability" of its operations.
The business acknowledged that the delayed filing was partially brought on by an impending regulatory crackdown, including an investigation that is already underway by the Department of Justice.
And when the bank issued a warning that it was uncertain about its ability to continue operating, cryptocurrency companies, including Coinbase and Galaxy Digital, rushed to sever links with Silvergate.
Silvergate has been crumbling for a while now. The company recorded a nearly $1 billion net loss in the fourth quarter after a rush for the exits at the end of the previous year that saw client deposits plunge 68% to $3.8 billion.
The company laid off 40% of its workers in January and sold debt instruments worth $5.2 billion to cover the withdrawals.
Citadel Securities and BlackRock, two financial institutions, recently acquired significant shares in Silvergate, purchasing 5.5% and 7%, respectively.
Together with New York-based Signature Bank, Silvergate has functioned as one of the two primary banks for cryptocurrency businesses in the past.
Compared to Signature's $114 billion in assets, Silvergate's assets are a little over $11 billion. One of Silvergate's main clients was the now-defunct cryptocurrency exchange FTX.