US-based Silvergate Bank, a crypto-friendly bank, has announced its “voluntary liquidation” and plans to wind down its operations. The bank faced inquiries from bank regulators, the Department of Justice, and accounting firms over its financial figures and compliance with financial laws.
The company believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward. All deposits will be returned completely. The California Department of Financial Protection and Innovation and relevant federal counterparts are monitoring the situation.
Delay in filing annual report
Last week, Silvergate Bank delayed filing its annual 10-K report due to questions from its independent auditors and accounting firm over its figures. Its stock price fell 58% to an all-time low of $5.72. Major crypto clients announced they would suspend their relationship with the bank. Signature Bank, another crypto-friendly bank, saw its stock price tumble around 5% in after-hours trading.
Silvergate Bank took out approximately $4.3 billion in loans from the Federal Home Loan Bank of San Francisco, a federal banking entity that provides this type of loan for banks. The fact that Silvergate’s situation warranted these loans should have sparked concern from the FDIC months ago, according to a banking industry veteran.
Also Read: Silvergate Bank discontinues its crypto payments network
Silvergate Exchange Network
Silvergate Bank has provided banking services to crypto companies since 2013 and launched its own internal settlement tool, the Silvergate Exchange Network (SEN). Late last Friday, Silvergate announced that it had suspended SEN.
Silvergate Bank had nearly 500 crypto clients when it filed to go public in November 2018. Its initial public offering (IPO) was completed in 2019, trading on the New York Stock Exchange. The bank boasted more than 750 crypto clients at the time.
The California Department of Financial Protection and Innovation is evaluating compliance with all financial laws and safety and soundness obligations. The White House is monitoring the situation, and the Senate Banking Committee is continuing to work with Congress and financial regulators to establish strong safeguards for the financial system from the risks of crypto. The Federal Reserve Board, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency declined to comment.
