Everything You Need to Know About Silvergate and its Crypto Clients
Here’s how Silvergate stock plummets more than 50% as crypto clients flee the troubled bank
The vast majority of crypto-friendly Silvergate Bank (SI) industry clients have left or are leaving the company less than a day after the company announced it would have to review its books with its auditors and warned of several impending challenges. On the day’s trading, the bank share price fell by more than 50% to an all-time low.
Silvergate announced that it would postpone filing its annual 10-K due to the need to respond to requests from its independent auditors and accounting firm, as well as “pending regulatory and other inquiries and investigations.” In a forward-looking statement, the bank warned that it could face inquiries from bank regulators and the US Department of Justice and that its ability to “continue as a going concern” over the next year could be jeopardized. Coinbase, Circle, Paxos, Crypto.com, Bitstamp, Cboe Digital Markets, Galaxy Digital, and Gemini all announced that they would suspend ACH transfers and other business operations with the bank, just days after crypto derivatives provider LedgerX did the same.
Kraken appears to be the only major cryptocurrency exchange still using Silvergate, having terminated transactions with rival bank Signature (SBNY).
Silvergate Bank also stated in its filing that it would be required to repay Federal Home Loan Bank loans obtained last year. “Since December 31, 2022, several circumstances have occurred that will negatively impact the timing and unaudited results previously reported in the Earnings Release, including the sale of additional investment securities beyond what was previously anticipated and disclosed in the Earnings Release, primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco,” according to the filing. Protos, a cryptocurrency news outlet, reported in January that Silvergate and Signature were utilizing FHLB loans, receiving up to $15 billion in total.
Silvergate Bank announced that it would postpone the filing of its annual report, sending its stock price down more than 10% in after-hours trading. The crypto-friendly bank has announced that it will have to postpone the filing of its annual 10-K report for the fiscal year 2022 and that it will take more than two weeks to complete. “The Company is currently analyzing certain regulatory and other inquiries and investigations pending concerning the Company,” according to the filing.
Silvergate’s accounting firm, as well as its independent auditors, are requesting additional information.
Silvergate also hinted at regulatory scrutiny in the “forward-looking statements” section.