Silvergate Bank Goes Into Liquidation and Will Shutdown Operations Soon
On Wednesday, March 8, Silvergate Bank officially declared that it will soon enter into liquidation and wind down all its operations. This is one of the first instance of the FTX contagion spreading to traditional banking institutions.
Silvergate Bank has been facing massive liquidity issues following heavy withdrawals after the FTX collapse. With losses mounting and deposits drying up, the bank has announced to shutdown its operations with applicable regulatory processes.
In its official press release on Wednesday, March 8, Silvergate Bank noted: “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.”
Following the news, Silvergate (NYSE: SI) stock tanked by a straight 50% in the aftermarket hours trading on Wednesday. The Silvergate Bank stock has been on a freewill since November 2021 and has plunged by roughly 98%.
As the SI stock entered a bearish momentum, short sellers have been making a fortune. They have netted a total of $780 million in profits by shorting the SI stock, of which, $190 million comes from the last week alone.
The collapse of Silvergate Bank has drawn sharp comments from US lawmakers. Senator Sherrod Brown, chair of the Senate Banking, Housing, and Urban Affairs Committee, said: “Today we are seeing what can happen when a bank is over-reliant on a risky, volatile sector like cryptocurrencies. “When banks get involved with crypto, it spreads risk across the financial system and it will be taxpayers and consumers who pay the price.”
Wall Street critic Senator Elizabeth Warren took this moment to warned traditional financial institutions of the heightened risks associated with dealing in crypto. “As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. Now, customers must be made whole & regulators should step up against crypto risk,” she said.
The collapse of the Silvergate Bank would surely put a greater regulatory pressure on other bank to demonstrate their dealings with crypto players are safe and sound.
In its stamens on Wednesday, Silvergate Bank stated it is “considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”
Last week, Silvergate Bank also announced discontinuing the Silvergate Exchange Network (SEN). “All other deposit-related services remain operational as the Company works through the wind down process. Customers will be notified should there be any further changes,” it said.