- Silvergate, one of the biggest banks dealing in cryptocurrency, announced on Wednesday that it would be undergoing voluntary liquidation.
- The bank believes an orderly wind down of operations and a voluntary liquidation is the best path forward.
- The lender assured all customers that their deposits would be fully repaid.
After a tumultuous period of fighting to stay afloat, Silvergate, a California-based crypto-friendly bank, has finally decided to bow out. Silvergate Capital, the holding Company of Silvergate Bank, announced on Wednesday its decision to wind down its operations and voluntarily liquidate the Bank in an orderly manner and compliance with applicable regulations.
Silvergate Agrees To A “Voluntary Liquidation” Process
The development was validated by the California Department of Financial Protection and Innovation (DFPI), which issued a statement saying that the Bank, which is currently “under the supervision of the DFPI, has voluntarily begun the liquidation process.”
DFPI Commissioner Clothilde Hewlett said:
“The Department of Financial Protection and Innovation is monitoring the situation closely to facilitate the safe and expeditious voluntary liquidation of Silvergate Bank. The Department is evaluating compliance with all financial laws and safety and soundness obligations and is working closely with relevant Federal counterparts.”
The Californian regulator further emphasized that it expects that going “any person offering financial services that operate in California will comply with state and federal laws.”
In light of this, the banking giant cited recent industry events and regulatory developments as a significant factor in its decision to begin the process of voluntary liquidation. An excerpt from the Bank’s statement read:
“… Silvergate believes that an orderly wind-down of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank’s wind-down and liquidation plan includes fully repaying 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.
In connection with the decision, Silvergate has engaged Centerview Partners LLC., an American independent investment banking firm, as a financial advisor and Cravath, Swaine & Moore LLP, a law firm headquartered in New York City, as a legal advisor. The Bank has also employed the services of a risk management consulting firm Strategic Risk Associates, to provide transition project management assistance.
Silvergate Bank discontinued the Silvergate Exchange Network (SEN) earlier this month.
“Effective immediately, Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN),” the Company said on its public website on Friday. “All other deposit-related services remain operational as the Company works through the wind-down process. Customers will be notified you should there be any further changes.”
The news on Silvergate Bank’s liquidation comes just a few days after reports emerged suggesting that the Bank was discussing different ways to avoid a shutdown with US federal officials.
Most of the Bank’s many crypto clients ended their relationships with the Bank after Silvergate delayed its annual 10-K filing report. High-profile companies, including Kraken, Coinbase, Gemini, Circle, and Tether, led this exodus.
Sillvergate also suffered a $1 billion loss in the final quarter of 2022 thanks to the collapse of the Sam Bankman-Fried’s FTX cryptocurrency exchange. Concerns about the Bank’s association with FTX caused depositors to pull $8 billion from the Bank in the final quarter of last year.
Silvergate is also being investigated by the US Department of Justice (DoJ) over its dealings with FTX and sibling trading firm Alameda Research. However, the Bank has not been accused of any wrongdoing or fraud.
Following the news, its stock price plummeted to a record low, falling 5.76% Wednesday to $4.91, marking a 98% drop from its November 2021 peak of $219.75.
