Silvergate Capital enters bankruptcy after crypto bank's shutdown
By Dietrich Knauth
Sept 18 (Reuters) -Silvergate Capital, the parent company of crypto-focused Silvergate Bank, has filed for bankruptcy to wind down its operations after the bank's 2023 shutdown.
The company, which has no remaining lines of business, filed for bankruptcy late Tuesday in Wilmington, Delaware, to complete the bank's liquidation and pay creditors using its remaining cash.
La Jolla, California-based Silvergate, which primarily served clients in the cryptocurrency industry, ceased operations in March 2023 and returned deposits to customers after turmoil in the broader digital asset market caused a run on the bank.
After repaying customer deposits, Silvergate Capital has about $163 million in cash that it will divide among its stakeholders in bankruptcy. Silvergate expects to fully repay bondholders who are owed $18 million and make payments to holders of preferred equity, but it does not expect to be able to repay holders of its common stock.
Silvergate was one of several U.S. banks to collapse in 2023, including Silicon Valley Bank, First Republic Bank and Signature Bank.
Silvergate had expanded rapidly as crypto markets took off, with the bank's total deposits growing from $1.8 billion at the end of 2019 to $14.3 billion at the end of 2021. Digital asset exchange customers accounted for approximately 58% of Silvergate Bank's overall deposits in 2021, according to court filings.
After a spate of crypto companies failed in 2022, including the once-prominent crypto exchange FTX, customers withdrew more than $8 billion from Silvergate. The withdrawals forced the bank to sell long-term debt securities at a loss, according to court filings.
Silvergate Capital said that U.S. regulatory scrutiny in the wake of the 2022 crypto collapse made Silvergate Bank’s business model "untenable."
Silvergate agreed in 2023 to pay $63 million to end probes by the Federal Reserve, California's bank regulator, and the U.S. Securities and Exchange Commission. Bank regulators said they found deficiencies in Silvergate's monitoring of transactions in compliance with anti-money laundering laws, while the SEC said the bank and three of its top executives made misleading statements.
Silvergate said in bankruptcy court filings that its bank "did not fail," and that it repaid all customer deposits without any cost imposed on the U.S. Federal Deposit Insurance Corporation.
The case is In Re: Silvergate Capital Corp, U.S. Bankruptcy Court for the District of Delaware, No. 24-12158
For Silvergate Capital: Paul Heath, Emily Mathews, Michael Merchant and David Queroli of Richards, Layton & Finger
Read more:
Defunct Silvergate Bank's owner settles with regulators over compliance lapses
Crypto's string of bankruptcies
FTX abandons efforts to restart its crypto exchange
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
