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Tuesday, March 28, 2023

Silvergate files for bankruptcy and shares plunge nearly 50% on Wall Street

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Silvergate Capital Corporation, parent of Silvergate Bank declared bankruptcy and announced the “reduction of operations”. How it impacted cryptocurrency investors.

Silvergate Capital Corporation, parent of Silvergate Bank declared bankruptcy and announced the “reduction of operations”. Although it had been on the line for a week, investors in cryptocurrencies They were shocked after the announcement. The company announced that it will return the deposits and the actions sink in Wall Street almost 50% premarket.

“In light of recent developments in the sector and regulations, Silvergate believes that the best way forward is the orderly cessation of operations and the voluntary liquidation of the bank,” the company said in a statement. Silvergate’s dissolution and liquidation plan includes a full refund of all client deposits. As reported by the company, it is also studying the “best way” to resolve the claims and “preserve the residual value of its assets, including its patented technology and its tax assets”, although it has not explained how it intends to do it.

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Courtesy: Cryptonoticias

Courtesy: Cryptonoticias

Together with Signature Bank, Silvergate has been one of the top two banks for cryptocurrency companies. According to the latest data, Silvergate has just over $11 billion in assets, compared to Signature’s more than $114 billion.

Bankrupt crypto exchange FTX was one of the main clients by Silvergatewhich caused the company to be investigated by the US Department of Justice.

The shares reached over 220 dollars in November 2021. It should be noted that, recently, investment firms Citadel Securities and BlackRock they took major stakes in Silvergate, buying 5.5% and 7%, respectively.

How Silvergate got into this crisis

Silvergate has been in trouble for months. In addition to laying off 40% of its staff in January, the company posted a net loss of almost $1 billion in the fourth quarter, following a spate of retirements late last year and the bankruptcy of FTX. In that period, customer deposits fell 68%, to $3.8 billion. To cover withdrawals, Silvergate had to sell $5.2 billion in debt securities.

The company went to Federal Home Loan Bank to get another $4.3 billion. That loan caught the attention of legislators like Democratic Sen. Elizabeth Warren, who said this “it further introduced the risk of the crypto market into the traditional banking system”.

Source: Ambito

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