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Crypto-friendly bank Silvergate has announced plans to shut down in an orderly manner and fully repay all deposits.
Silvergate Capital has decided to shut down operations and liquidate its bank following effects of problematic market conditions. On Wednesday, the crypto-focused bank made the grim announcement, which also saw its stock plummet over 36% in after-hours trading.
In addition to ‘voluntarily liquidating’ in an ‘orderly manner,’ Silvergate also revealed that it would fully repay all deposits.
The announcement read:
“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.”
Silvergate also added it would “discontinue the Silvergate Exchange Network (SEN),” previously announced last week on its public website. However, the bank assured that all “other deposit-related services remain operational” amid the wind-down process. In addition, Silvergate committed to notifying customers of any further changes to the development.
Silvergate revealed Centerview Partners LLC as its financial advisor in its liquidation proceedings. In addition, the California-based crypto bank also disclosed that Cravath, Swaine & Moore would act as legal advisors.
Silvergate to Shut Down amid Delay of Annual 10-K Filing
Silvergate’s plan to shut down comes on the heels of discontinuing its SEN payments platform, considered one of its core offerings. Last week, the crypto-friendly financial institution also stated it would delay filing its annual 10-K for last year. The reason given was to sort out the business’ viability. However, Silvergate also revealed the delayed filing was due in part to a looming regulatory crackdown. This includes an investigation already afoot by the US Department of Justice.
Silvergate also ascribed the filing delay to Congressional inquiries, including investigations from its banking regulators. These regulators include the Federal Reserve as well as the California Department of Financial Protection and Innovation.
Silvergate, one of the two primary banks for crypto companies, has been struggling for months. For instance, the company laid off 40% of its workforce in January and reported a massive $1 billion net loss for Q4 2022. The loss resulted from the customer exodus Silvergate experienced at the end of last year, which drove deposits down 68% to $3.8 billion. The crypto-centric bank sold $5.2 billion in debt securities to cover these withdrawals.
In addition to its emergency liquidity injection and substantial staff downsizing, Silvergate also suspended plans to launch a digital currency. Furthermore, the bank wrote off the $196 million linked to its purchase of Diem Association from Meta (NASDAQ: META).
Silvergate currently has a little over $11 billion in assets, compared to the more than $114 billion worth of assets at Signature, another leading crypto-friendly bank.