Some industry experts expected a bankruptcy filing! Instead, the California-based Silvergate Bank announced its intent to wind down operations and voluntarily liquidate the bank in an orderly manner. In the past few years, Silvergate became the largest crypto bank in the US, attracting as much as $14 billion in customer deposits and reaching a stock price of more than $200 in late 2021. All deposits will be fully repaid, according to a liquidation plan.
The voluntary liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network (SEN), which was considered to be one of its core offerings. Silvergate clarified that all other deposit-related services remain operational as the company winds down. Customers will be notified should there be any further changes.
Silvergate was hit with the collapse and bankruptcy of Sam Bankman-Fried’s crypto exchange FTX and its affiliated hedge fund Alameda Research. Both entities had accounts at Silvergate, which served as one of the two main banks for crypto companies, along with the much bigger New York-based Signature Bank, which holds assets of just over $114 billion.
Silvergate experienced a bank run over the last couple of weeks. Customers have rushed in the past few months to pull money out of Silvergate. in January 2023, the bank reported a nearly $1 billion dollar net loss in Q4 2022 and saw customer deposits plummet 68% to $3.8 billion. To cover the withdrawals, Silvergate had to sell $5.2 billion dollars of debt securities.
In January 2023, the bank reported that customers had withdrawn more than $8 billion, forcing it to sell assets to fund the run, accruing losses on the sale of the securities of $718 million.
Investment firms Citadel Securities and BlackRock recently took major stakes in Silvergate, buying up 5.5% and 7%, respectively.
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