One of the premier global banking systems for cryptocurrency has announced it is shutting its doors and will cease operations once all assets have been liquidated. Silvergate Bank, The La Jolla, California-based bank has seen billions in deposits leave the institution in recent months due to the collapse of the crypto market.
The crypto giant started facing significant headwinds in 2022 with the collapse of FTX, and the downfall of firms like Three Arrows Capital. Silvergate’s total deposits dropped 52% from $13.2 billion to $6.3 billion in Q4 of 2022 with the compounding effects of these problems. A $1 billion dollar net loss in the 4th quarter alone, along with laying off 40% of its workforce was a sign of things to come for the institution.
JUST IN: Silvergate announced it plans to wind down operations and voluntarily liquidate the bank.
Centerview Partners hired as adviser. @TheTerminal $SI pic.twitter.com/bPGEdnluzY
— Yueqi Yang (@Yueqi_Yang) March 8, 2023
In a statement from the previous week, problems for Silvergate seemed to amplify from bad to worse as probes from banking regulators and the Department of Justice were announced. Moreover, the bank reported a “going concern” problem, as its ability to functionally execute its financial obligations could be doubted. Perhaps the most concerning note to come out was the delay in filing the annual 10-K due to the aforementioned problems. The ensuing 57% intra-day trading crash of Silvergate’s stock would become self-explanatory. As of this writing, Silvergate stock is down more than 97% in the past 6 months with aftermarket trading bids placed at $2.88.
Silvergate’s statement cascaded into an avalanche of clients suspending their relationships with the once-prominent institution. Galaxy Digital, Coinbase, Crypto.com, and other noteworthy counterparties decided to suspend their relationships given the volatility that Silvergate has faced; a fall from grace from the 750+ crypto clients it served during its IPO in 2019.
Major shareholders like BlackRock and Citadel Securities will now be left holding the shreds, and will be sorting through the mess in the months to come.