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Silvergate CapitalA central lender for the crypto industry, said on wednesday that it is ceasing operations and liquidating its bank. The stock fell more than 36% in after-hours trading.
Silvergate serves as one of two New York-based main banks for crypto companies signature bank, Silvergate has over $11 billion in assets, compared to over $114 billion in Signature. Bankrupt crypto exchange FTX was a major client of Silvergate.
“In light of recent industry and regulatory developments, Silvergate believes that an orderly closure of bank operations and a voluntary liquidation of the bank is the best way forward,” the company said in a statement.
According to the liquidation plan shared on Wednesday, all deposits will be paid in full. The company did not say how it plans to resolve the claims against its business.
Centerview Partners will act as financial advisor to Silvergate and Cravath, Swain & Moore will provide legal services.
The liquidation comes less than a week after Silvergate shut down its payments platform, known as the Silvergate Exchange Network, or SEN, which was considered one of its flagship offerings. As part of the liquidation announcement, Silvergate clarified that all other deposit-related services remain operational as the company closes. Customers will be informed should there be any further changes.
Silvergate said last week it would delay filing While in its annual 10-K for 2022 it sorted out the “viability” of its business. The company revealed that the delay in filing was partly due to impending regulatory action, including an already ongoing investigation by the Department of Justice.
Silvergate attributed the delay to congressional inquiries as well as scrutiny from its banking regulators, including the Federal Reserve and California’s Department of Financial Protection and Innovation.
crypto companies like coinbase And Galaxy Digital rushed to sever ties with Silvergate last week after the bank warned it was unsure whether it could stay in business.
Silvergate has been struggling for months. in addition to laid off 40% of its employees In January, the firm reported a net loss of nearly $1 billion In the fourth quarter after a rush to exit to see customer deposits at the end of last year fell 68% to $3.8 billion, To cover the withdrawal, Silvergate had to sell debt securities worth $5.2 billion,
went to the firm Federal Home Loan Bank for an additional $4.3 billion, That debt caught the attention of lawmakers like Sen. Elizabeth Warren, D-Mass., who said “Crypto market introduced further risk into the traditional banking system.”
Investment firms Citadel Securities and BlackRock recently acquired large stakes in Silvergate, buying 5.5% And 7%respectively.
Watch, Silvergate plunges into pre-market trading after delaying its annual report