Silvergate to Liquidate Its Bank

Bitcoin and major altcoins plunged to three-week lows following the news of the crypto bank failure. Meanwhile, Silvergate short seller is now betting against Binance’s partner Signature.

Roll of american dollars tightened with red band
Image: Karolina Grabowska on Pexels

In its Wednesday press release, Silvergate Capital Corporation announced it will shut down and liquidate its subsidiary Silvergate Bank, a leading crypto lender that has been struggling to do well since the collapse of FTX in November.

The holding company said the decision comes “in light of recent industry and regulatory developments,” adding that the orderly wind-down of operations and voluntary liquidation of the bank is “the best path forward.”

“The Bank’s wind down and liquidation plan includes full repayment of all deposits,” the statement reads. “The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”

The announcement comes less than a week after Silvergate decided to shut down its crypto payment infrastructure known as Silvergate Exchange Network (SEN), the bank’s flagship offering that facilitated round-the-clock transfers between investors and crypto exchanges and served as an in-demand alternative to traditional bank wires.

Earlier this month, Silvergate Bank postponed filing its annual 10-K report with the SEC, saying that it needed additional time to conduct certain audit procedures. The company said it was “currently analyzing certain regulatory and other inquiries and investigations,” which was partly due to increased regulatory scrutiny and an ongoing probe by the U.S. Justice Dept that is investigating Silvergate’s relationship with FTX and Alameda Research. For now, the bank hasn’t been accused of any wrongdoing.

“As the bank of choice for crypto, Silvergate Bank's failure is disappointing, but predictable. I warned of Silvergate's risky, if not illegal, activity—and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk,” senator Elizabeth Warren commented on the bank’s troubles.

Earlier this month, Warren, a longtime crypto skeptic, said that “crypto-friendly” banks like Silvergate open the U.S. banking system to the risks of contagion from the crypto collapse.

“It’s the bank regulators’ job to insulate the banking system and taxpayers from the risk of crypto fraud,” the senator, quoted by Decrypt, said during a January panel on challenges posed by digital assets. “They have the tools, and they need to use them.”

Meanwhile, Silvergate short seller Marc Cohodes, who correctly called the bank’s demise in November, now turns his sights to Binance and its SWIFT partner Signature Bank. Trader claims to have never been involved in crypto, as he prefers to deal with “financial structures.” Cohodes initially chose Silvergate as a proxy to short FTX, which he correctly called a fraud a month before its swift collapse. Now outspoken short seller aims to apply the same strategy to the industry titan Binance by attacking its banking partner Signature.

“They have major problems, and they have very similar issues to Silvergate. It’s not as exposed to crypto as Silvergate, but their loan book is terrible. And they have huge KYC and AML liability,” Cohodes told DL News.

“I told everyone… to get their money out of any offshore exchange, and they should. And hopefully, people figure it out,” he added.