Omar Marques Lightrocket | Getty Images
Capital of Silvergate, the central creditor for the crypto industry, said there is winding down operations and liquidating its bank. Shares fell more than 36% in after-hours trading.
Silvergate has become one of the two main banks for crypto companies, along with the New York base Signature Bank. Silvergate only has $11 billion in assets, compared to Signature’s $114 billion. Bankrupt crypto exchange FTX is a major Silvergate customer.
“In light of the new industry and regulatory developments, Silvergate believes that the orderly wind down of the Bank’s operations and the Bank’s voluntary liquidation is the best way forward,” the company said in a statement.
All deposits will be paid in full, according to the liquidation plan revealed on Wednesday. The company has not said it plans to settle claims against its business.
Centerview Partners will serve as Silvergate’s financial advisor and Cravath, Swaine & Moore will provide legal services.
The liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network, or SEN, which was considered one of its core offerings. As part of the liquidation announcement, Silvergate clarified that all deposit-related services will remain operational while the company is winding down. Customers will be notified of any further changes.
Silvergate said last week it would delay its annual 10-K filing for 2022 while it sorts out the “continuity” of the business. The company announced that the pending filing is due to pending regulatory violations, including an ongoing investigation by the Department of Justice.
Silvergate also attributed the delay to Congressional inquiries, as well as investigations by banking regulators, which include the Federal Reserve and the California Department of Financial Protection and Innovation.
Crypto companies like that Coinbase and Galaxy Digital raced to cut ties with Silvergate last week after the bank warned that it was not sure whether it could stay in business.
Silvergate has been struggling for months. In addition to laying off 40% of its workforce in January, the company reported a net loss of nearly $1 billion in the fourth quarter after a rush of exits late last year that saw customer deposits drop 68% to $3.8 billion. To cover the withdrawal, Silvergate had to sell $5.2 billion in debt securities.
The company moved to Federal Home Loan Bank for an additional $4.3 billion. The loan drew the attention of lawmakers like Sen. Elizabeth Warren, D-Mass, who said it “further introduces the risk of the crypto market into the traditional banking system.”
Investment firms Citadel Securities and BlackRock recently took major stakes in Silvergate, buying 5.5% and 7% respectively.
WATCH: Silvergate plunges into pre-market trading after delaying annual report
