Cryptobank Silvergate preparing for bankruptcy closes network of exchangers
2023.03.04 13:27
Cryptobank Silvergate preparing for bankruptcy closes network of exchangers
By Kristina Sobol
Budrigannews.com – Silvergate, a crypto bank, said on March 3 that it was ending its digital asset payment network because it was a “risk-based decision.” The move comes after fears of bankruptcy caused the bank’s stock to fall by more than 59% over the past five days.
On the website of Silvergate, a disclaimer stated:
“Silvergate Bank has made a risk-based decision to end the Silvergate Exchange Network (SEN) immediately. All other services related to deposits are still available.
Judge Michael B. Kaplan of the United States issued a second decision on the same day requiring Silvergate to return $9,850,000 that BlockFi had deposited. The court ordered the bank to immediately release the funds following an agreement between the two companies in November 2022, according to documents posted on the restructuring advisor’s website.
Silvergate and BlockFi are two of the crypto companies that were affected by the FTX collapse last year. Prior to experiencing significant outflows in the fourth quarter of 2022, the crypto bank had liquidity issues, resulting in a $1 billion net loss.
Silvergate reportedly borrowed $3.6 billion from the U.S. Federal Home Loan Banks System (FHLB), a consortium of 11 regional banks across the United States that provide funds to other banks and lenders, in an effort to mitigate the effects of a surge in withdrawals.
The digital asset bank described the actions taken to maintain cash liquidity, including wholesale funding and selling debt securities, in a report that was released by the Securities and Exchange Commission (SEC) of the United States. The report emphasized the significant outflows of deposits and outlined the reasons for these outflows. The crypto bank’s relationship with FTX and Alameda Research is the subject of class-action lawsuits.
After Silvergate postponed the filing of its annual 10K financial report, concerns that a liquidity crisis could lead to bankruptcy protection rose this week. Cryptocurrency companies Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos all announced within the next 24 hours that they would reduce their partnerships with the bank in some way. MicroStrategy and Tie joined various firms freely denying any significant openness to the bank.
Silvergate stock was the second most shorted stock in the United States, with over 72.5 percent of its shares being shorted, according to a Short Interest Report from February.
