Crypto-friendly bank Silvergate shuts down after FTX explosion

Silvergate Capital Corporation, the holding company of Silvergate Bank focusing on cryptocurrency, announced Fourth, it intends to terminate operations and voluntarily liquidate the banking unit.

The move comes days after Silvergate shocked the industry with the news that it was facing a financial crisis. The institution, which is one of the few banks to act as an intermediary in the institutional crypto space, is yet another victim of the “crypto winter” following the boom of FTX, which uses Use a bank to transfer money from customers.

The bank was founded three decades ago in California as a small local lender, but in recent years it has flourished to become a key player in the industry. electronic money. Its fortunes also fluctuate according to market fluctuations. As the token price exploded, deposits at Silvergate grew from around $2 billion in 2020 to over $10 billion in 2021. But until the end of 2022Its deposits fell to $6.3 billion, down more than 50% from just three months earlier.

At the time of the FTX crash last fall, Silvergate was trying to reassure investors and regulators that their exposure to the digital asset exchange was limited.

“As of September 30, 2022, Silvergate’s total deposits from all digital asset customers were $11.9 billion, of which FTX accounted for less than 10%. Silvergate has no outstanding debts and investments in FTX and FTX is not a custodian of Silvergate’s bitcoin-collateralized SEN Leverage loans. To be clear, our relationship with FTX is limited to deposits,” Alan Lane, CEO of Silvergate, wrote in a report. declare in November.

But the government looked elsewhere. US prosecutors in the Justice Department’s fraud unit are investigating Silvergate’s dealings with FTX and Alameda Research, Bloomberg report in February.

The closure of Silvergate will deal a major blow to the way money moves in and out of the crypto world. On March 3, the bank announced that it would stop the Silvergate Exchange Network (SEN), its crypto payment network enables the transfer of dollars between investors and crypto exchanges 24/7. The volatile nature of cryptocurrencies means that very few financial institutions want to touch cryptocurrencies.

Looks like Silvergate customers will at least get their deposit back. As the company said in its latest statement:

“In light of recent industry and regulatory developments, Silvergate believes that an orderly shutdown of the Bank and a voluntary liquidation of the Bank is the best way forward. The Bank’s liquidation and dissolution plan includes the full return of all deposits. The company is also looking at how best to resolve claims and preserve the residual value of assets, including proprietary technology and tax assets.”

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