Silvergate has been an integral part of the crypto world as its leading bank, but it was not enough to keep its head above water. Silvergate Capital Corporation has announced that it will voluntarily liquidate Silvergate Bank amidst recent industry and regulatory developments.
Shutting Down Silvergate
Silvergate Capital Corporation announced that it will be winding down operations for Silvergate Bank in an "orderly manner and in accordance with applicable regulatory processes." The holding company believes that liquidation is the best course of action for the bank.
As it does, the company will repay all deposits to its customers and will look into the best way to resolve claims and preserve the residual value of its assets, which include proprietary technology and tax assets, according to The Verge.
The collapse follows the company's apparent struggle which goes the same for its known clients like FTX and Genesis. Silvergate's earnings report back in January showed that it lost a billion dollars in one quarter brought on by customers withdrawing a total of $8.1 billion.
In its recent documentation, it found that the company was worse off than the quarterly report showed. The corporation also decided to shut down Silvergate Exchange Network, which was used by crypto exchanges like Kraken, Coinbase, and Gemini.
Chair of Senate Banking Committee Sherrod Brown stated that the fall of Silvergate shows "what can happen to a bank when it is over-reliant on a risky, volatile sector like cryptocurrencies," as mentioned in Financial Times.
The shutdown of the leading bank in the crypto world will initiate a significant shift in the industry. Cryptocurrency firms would have to change banks, which could make navigating through digital assets riskier than it already is.
Silvergate has hired Centerview Partners as its financial adviser as well as Cravath, Swaine & Moore as legal advisers. California's state banking regulator will ensure that Silvergate's shutdown will be "safe and expeditious."
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Issues that may Arise
Although the company's press release is filled with forward-looking statements, they also mentioned that there was no guarantee of it all, seeing as they cannot predict what could happen and what issues may get in the way of winding down.
For one, winding down the bank's operation may not go as smoothly, resulting in a delay in repaying its customers in full. There's also the company's ability to "resolve claims and preserve any residual value of its assets."
The corporation may also encounter obstacles in acquiring applicable regulatory or governmental approvals needed in order to complete its process of shutting down, as well as litigation that could lead to potential liability and restrictions on Silvergate's historical business.
It's also possible that the company may not deliver the results of procedures and documentation in a timely manner, as well as complete the audit procedures with the hired independent registered public accounting firm.
Silvergate Capital Corporation could also experience delays regarding its ability to file for Form 10-K and future Securities and Exchange Commission reports. They warned that the forward-looking statements should not be seen as a representation by the company.
Related: FTX Cryptocurrency Files for Bankruptcy, CEO Bankman-Fried Resigns
