Crypto-friendly Silvergate Bank will “voluntarily liquidate” its assets and wind down operations, its holding company Silvergate Capital Corp. announced Wednesday.
The bank was under fire after announcing a week ago it would have to delay filing its annual 10-K report due to questions from its independent auditors and accounting firm over its figures. In Wednesday’s announcement, Silvergate announced it had tapped Centerview Partners as a financial adviser, the law firm Cravath, Swaine and Moore LLP and Strategic Risk Associates for “transition management assistance.” The wind-down will see all deposits repaid in full, the company said.
“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. The Bank’s wind down and liquidation plan 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,” it said in a press release.
The California Department of Financial Protection and Innovation, the state regulator for the La Jolla, California-based firm, said it was monitoring the situation.
“The Department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant Federal counterparts,” DFPI Commissioner Clothilde Hewlett said.
In last week’s announcement, Silvergate revealed it was facing inquiries from bank regulators and the Department of Justice, and warned its ability to be a “going concern” over the next 12 months may be in doubt.
As a result, major crypto clients announced they would suspend their relationship with the bank, and its stock price fell 58% in intraday trading to an all-time low of $5.72 – down over $115 over the past year. Its stock tumbled even further after today’s announcement in after-hours trading. Signature Bank, another crypto-friendly bank, saw its own stock tumble around 5% in after-hours trading dipping nearly 10% before rebounding slightly.
The bank took 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 for banks. Still, the fact Silvergate’s situation warranted these loans should have sparked concern from the FDIC months ago, a banking industry veteran told CoinDesk.
Silvergate, a La Jolla, California-based bank, has provided banking services to crypto companies since 2013, and launched its own internal settlement tool called the Silvergate Exchange Network (SEN). Silvergate announced late Friday it had suspended SEN.
The company revealed it had nearly 500 crypto clients when it filed to go public in November 2018. Its initial public offering (IPO) was completed in 2019, trading on the New York Stock Exchange and boasting more than 750 crypto clients at the time.
Jesse Hamilton contributed reporting.
UPDATE (March 8, 2023, 21:50 UTC): Adds additional detail.
