Good morning dear readers of Tecnogalaxy, today we will talk about the Silvergate case.

Silvergate said on Wednesday 22/03/23 that it will close operations and voluntarily liquidate its bank after a crash in the cryptocurrency market saw billions of deposits leave the bank in recent months.

“In the light of recent regulatory and industry developments, Silvergate believes that an orderly liquidation of the Bank’s operations and a voluntary liquidation of the Bank itself is the best way forward,” said La Jolla’s bank, in California, in a regulatory repository. “The bank’s closure and liquidation plan includes the full repayment of all deposits. The company is also considering how best to resolve complaints and preserve the residual value of its assets, including proprietary technology and tax activities,” said Silvergate.


Silvergate shares plummeted by over 42% in “after-hour” trading. The stock was opened for €150 per share on the first trading day of last year. After the collapse of the FTX cryptocurrency exchange at the end of 2022, Silvergate recorded a loss of almost a billion dollars and saw its total deposits from digital asset customers fall to 3.8 billion from 11.9 billion in the fourth quarter.

Exactly a week ago, the company presented a notice that would delay the presentation of its annual report by citing business and regulatory challenges, which had led the company to weigh up how changes could affect its “Ability to continue as a company in operation for twelve months ” .

The warning plummeted the stock by more than half on Thursday. Shares then fell below €3.00.

The company subsequently suspended the Silvergate Exchange Network (SEN) on Friday afternoon. Along with Signature Bank’s Signet platform, SEN was one of two platforms that offered cryptographic companies US bank access outside normal banking hours.

Silvergate Bank, a state-owned bank, is jointly regulated by the Federal Reserve and the state of California. His holding company, Silvergate Capital, is also regulated by the Federal Reserve. The California Department of Financial Protection and Innovation is monitoring the situation according to a statement by its commissioner, Clothilde Hewlett.

“The Department is assessing compliance with all financial laws, as well as security and soundness obligations, and is working closely with the relevant federal counterparts,” added Hewlett.

The Federal Reserve had authorized the Federal Deposit Insurance Corporation (FDIC) to start talks with Silvergate to avoid closure.

In connection with the liquidation, Silvergate hired Centerview Partners LLC as financial advisor, and Cravath, Swaine & Moore LLP as legal counsel and to provide assistance in managing the transition project.

Silvergate has carved out a niche by giving banking access to an increasing number of cryptographic startups. These offers evolved into the SEN, where cryptocurrency depositors could make transfers in US dollars outside traditional bank hours.

Silvergate held $1.8 billion in total deposits and $2 billion in assets at the end of the fourth quarter of 2018. At the peak of cryptocurrencies in 2021, its total deposits and assets had risen to $14.3 billion and $16 billion respectively. Following the failure of the FTX cryptocurrency exchange, Silvergate’s deposits and total assets fell to $6.2 billion and $11.3 billion by the end of the fourth quarter of last year.

With that drop in deposits, Silvergate’s capital relative to its assets fell by half. This leverage ratio fell from 10.7% in the third quarter to 5.3%, a specific concern for banks with regulators having reason to intervene for any US bank below 5%.

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