Silvergate Capital Corporation (NYSE:SI), the holding company for Silvergate Bank, has decided to wind down operations and voluntarily liquidate the Bank in an “orderly manner and in accordance with applicable regulatory processes.”
Shares in Silvergate are trading down by over 30% in after-hours trading. Silvergate was once valued in the billions of dollars. At market close today, Silvergate held a market cap of just over $155 million.
Silvergate has endured an onslaught of issues as its once-hot crypto services collapsed. While many federally chartered banks sought to steer clear of crypto, Silvergate Bank embraced digital asset innovation – supporting various crypto exchanges and other digital asset firms. Early on, these services were lucrative but beginning in 2022 following the collapse of multiple crypto firms; the wheels started falling off the entire sector.
The bankruptcy of FTX, once a client of Silvergate’s, is emblematic of the demise of the bank.
At the beginning of March, Silvergate announced that it was unable to publish its annual report (1o-K) and quarterly numbers, adding that it would not be able to make an extended deadline either. At the same time, Silvergate indicated it was questioning its ability to continue as an ongoing operation as losses mounted. To quote the bank:
“These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank, and could result in the Company and the Bank being less than well-capitalized. In addition, the Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements. The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.” [emphasis added]
Silvergate stated that it is of the opinion that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward, following the dramatic events in the crypto industry. Any decision by the bank to cease operations would have been in coordination with federal regulators.
For deposit holders, the bank said its liquidation plan included full repayment of these funds.
The bank said it is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.
Silvergate shared that Centerview Partners LLC is acting as its financial advisor, Cravath, Swaine & Moore LLP is acting as legal advisor, and Strategic Risk Associates is providing transition project management assistance.
All deposit-related services are expected to remain operational as the bank works through the wind-down process.