​Silvergate crypto bank to wind down operations and liquidate the business

What’s new? Crypto bank Silvergate will wind down all operations and then go into liquidation. Representatives of its parent company, Silvergate Capital Corporation, made the announcement on March 8, adding that in light of recent industry and regulatory changes, the move is “the best.” The plan includes returning all deposits. The company is also exploring options for settling claims and preserving the residual value of the assets.

Information on the Silvergate website

What else is known about Silvergate’s liquidation? Centerview Partners will serve as financial advisor to the crypto bank, Cravath, Swaine & Moore will serve as legal advisor, and Strategic Risk Associates will assist in transition project management.

At the same time, since early March, experts from the US Federal Deposit Insurance Corporation (FDIC) have been exploring options to save the bank. They considered attracting investors to strengthen liquidity, a merger with another company, as well as liquidation and payments to depositors by the FDIC.

Crypto exchanges Binance, Coinbase, and OKX, as well as fintech company Paxos, said they lost nothing on Silvergate’s closure. For example, Binance CEO Changpeng Zhao wrote on Twitter that the platform has no assets in Silvergate and customer funds are safe.

Sad to see this happening. But at least, it seems they will return all deposits in full. Protect users. #Binance do not have asset losses at Silvergate. Funds are #SAFU. https://t.co/0ng5Cb9h4M — CZ 🔶 Binance (@cz_binance) March 9, 2023

The Coinbase team also said that the exchange has no customer or corporate funds in Silvergate and that user assets are still safe. The platform’s representatives added that they regret Silvergate’s decision to cease operations because it has contributed to the growth of the crypto economy.

Sad to see this happening. But at least, it seems they will return all deposits in full. Protect users. #Binance do not have asset losses at Silvergate. Funds are #SAFU. https://t.co/0ng5Cb9h4M — CZ 🔶 Binance (@cz_binance) March 9, 2023

OKX President Hong Fang issued a similar statement. According to her, the platform’s team has done a great job of managing risk and minimizing the impact of such events. Fang also noted that the liquidation of Silvergate would slow the global adoption of cryptocurrencies.

Very sad to see this happening with Silvergate. It will now take a longer time for crypto to reach more people. Our corporate and customer funds are safe. Team have done a great job of managing risk and minimizing exposure. https://t.co/AYuv3oLvKg — Hong (@hfangca) March 8, 2023

A Paxos spokesman told CoinDesk that the company “has virtually no exposure to Silvergate.” He noted that as a regulated company, Paxos has always paid special attention to protecting customer funds, so banking redundancy is built into its platform.

What is going on with Silvergate? In January, amid the aftermath of the FTX crypto exchange’s bankruptcy, Silvergate’s customers began withdrawing funds en masse, causing the bank to sell billions of dollars worth of assets to stabilize its balance sheet. Last quarter, Silvergate reported a $1 billion loss, and on March 3 it announced it was shutting down its flagship crypto payment network.

In addition, the US Justice Department began investigating Silvergate’s transactions with FTX and its affiliated hedge fund, Alameda Research. However, the investigation may end without charges.