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Silvergate Bank Announces Voluntary Liquidation

Following our report on the beleaguered US crypto banking sector, former banking partner of choice for many major crypto exchanges, Silvergate Bank, has announced that it will enter voluntary liquidation and wind down operations.

Silvergate bank liquidated

As Observers very recently reported, all has not been well in the US crypto banking sector. And despite eleventh hour discussions with the FDIC on a potential path to salvage the business, Silvergate Bank has now announced that it is to voluntarily liquidate its assets and wind down operations.

The beginning of the end came for Silvergate when it announced last week that it would need to delay filing its annual 10-K report detailing financial performance, and warned that its ability to continue to be a going concern over the next 12 months was in doubt. This led to a mass exodus of crypto exchange clients and the closure of its US dollar wire-transfer on-ramp, Silvergate Exchange Network (SEN).

In its press release announcing the move, holding company Silvergate Capital Corp made assurances that despite the closure, all customer deposits would be returned, and suggested that it may be trying to find a separate buyer for its SEN platform:

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a 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 Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”

Both Bitcoin and Ether lost about 7% in value following the announcement, with a report from CNBC claiming that this relatively small drop (in crypto volatility terms), suggested that the potential failure of the bank had already been priced in following the closure of the SEN earlier this month.

It has been a brutal week for the banking sector, whether crypto-friendly or not. Shares in Silicon Valley Bank (SVB), a major lender for tech start-ups, lost over 60% in their biggest one day drop, after it announced a share sale to plug a $1.8 billion loss. However the sale was reportedly frozen as depositors withdrew funds more quickly than shares were selling, and the bank has now seemingly been shut down by regulators.

The knock-on effect of SVB’s initial share plunge saw the four largest US banks lose over $50 billion in market value, which also crossed the Atlantic to see the stock of embattled Credit Suisse to hit an all-time low.

Credit Suisse has this week delayed the publication of its 2022 annual report following intervention by the SEC. However, it has already reported a net loss of 7.3 billion Swiss francs ($7.8 billion) for 2022, and suggested that another large loss is on the cards for 2023.

Excuse us if we continue to Observe while peeking through our fingers.