Silvergate Financial institution says it is self-liquidating, winding down operations

The Silvergate Bank headquarters in La Jolla, California.

Ariana Drehsler/Bloomberg

Silvergate Capital Corp. plans to wind down the operations of its crypto-friendly bank, repay all depositors in full and self-liquidate, the company said Wednesday. 

The state-chartered Silvergate Bank, based in La Jolla, Calif., ran into trouble last year after crypto companies removed deposits following the collapse of the cryptocurrency exchange FTX. Both FTX and its sister firm Alameda Research had accounts at Silvergate. 

The California bank had shored up its liquidity by tapping the Federal Home Loan Bank of San Francisco for $4.3 billion in the fourth quarter after a run on deposits. Last week, Silvergate warned investors that it was struggling to continue as a “going concern.” The bank repaid the Home Loan bank on March 2.

“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 company said in its statement Wednesday.

Silvergate said it is considering how to resolve claims and preserve the value of its assets including its proprietary technology and tax assets. The self-liquidation process is being monitored by the California Department of Financial Protection and Innovation. 

“The department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant federal counterparts,” DFPI Commissioner Clothilde Hewlett said in a statement.

Senate Banking Committee Chairman Sherrod Brown said in a statement that he remains concerned about the exposure of banks to cryptocurrencies. 

“As the impact of FTX’s collapse continues to ripple outward, today we are seeing what can happen when a bank is over reliant on a risky, volatile sector like cryptocurrencies,” Brown said. “I’ve been concerned that when banks get involved with crypto, it spreads risk across the financial system and it will be taxpayers and consumers who pay the price.”

Bank self-liquidations are infrequent, but Silvergate said it decided to wind down its own affairs, essentially selling its assets without filing for bankruptcy. At some point, the Federal Deposit Insurance Corp. may have to step in if depositors are not repaid in full. 

The Federal Reserve and FDIC declined to comment on Silvergate’s announcement Wednesday.

Shares of Silvergate Capital had plummeted 37% in after-hours trading to $3.08 as of 5:56 p.m. Eastern time.

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