Pro-Crypto Bank Silvergate Sees Stock Drop amid DOJ Congressional and Bank Regulator Inquiries

UTC by Tolu Ajiboye · 3 min read
Pro-Crypto Bank Silvergate Sees Stock Drop amid DOJ Congressional and Bank Regulator Inquiries
Photo: Depositphotos

The stock of beleaguered crypto bank Silvergate has taken a new hit as the company weathers intense regulatory inquiries over its FTX association. 

Silvergate (NYSE: SI) stock plunged more than 10% in after-hours trading after the crypto-friendly bank revealed it might face regulatory inquiries. Yesterday, Silvergate Capital also announced a delay in filing its annual report due to the inquiry.

The bank’s health has been the subject of concern over the last few months following FTX’s collapse in November. Meanwhile, amid the current drawdown of its stock and regulatory inquiries, Silvergate revealed that its financial health could deteriorate further. The California bank said it might experience challenges with customer retention in addition to any litigation-induced constraints.

Silvergate Delays Annual 10-K Filing amid Stock Slide & Regulatory Inquiries

Silvergate revealed it would need more than two extra weeks to file its 2022 fiscal year 10-K report. The filing specifies that the regulatory scrutiny the company is currently battling comes from several sources, including Congress, the Department of Justice, and bank regulators. The bank also explained a possible difference between company results and predicted statements. According to the filing:

“There are or will be important factors that could cause the Company’s actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to … restrictions on the Company’s business….”

Silvergate’s accounting firm and independent auditors have requested further information. According to the bank, the impact of the ongoing events could affect its ability to continue operations smoothly.

DOJ Probe over FTX Dealings

Early last month, reports stated that Silvergate was under probe by the DOJ over its association with FTX. Although the investigative subject appeared speculative at the time, there was no denying Silvergate’s close ties to the defunct crypto exchange.

The DOJ inquiries sought to ascertain whether the crypto bank had any fraudulent relationship with FTX, specifically Silvergate accounts linked to SBF. Furthermore, investigators seek to determine how much the crypto bank knew about FTX’s alleged scheme to defraud investors.

Also in February, reports revealed that Silvergate’s stock was the second-most shorted in the United States. At the time, the bank saw 72.57% of its stocks shorted in the U.S. market, which represented extreme bearish sentiment.

Silvergate Stock Second-Most Shorted in US

Silvergate Capital stock is down by a massive 85% over the past year and faced heightened selling pressure after FTX’s implosion, with recent inquiries worsening the situation. The decline in the crypto bank’s shares has also come amid the wider tech selloff that happened last year. Several tech stocks and valuations plummeted or became insolvent as the crypto winter raged.

The prices of digital currencies also plunged, with Bitcoin (BTC) slipping beneath the 20K threshold at some point. As of press time, the leading crypto is trading comfortably above $23K.

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