Silvergate Bank, a financial institution that provides services to major cryptocurrency companies, is in danger of closing down due to a significant sell-off of assets and an inability to repay debts.
The bank’s shares dropped by 28% to $10 in early March after it announced a delay in its annual report. Silvergate Bank has notified the U.S.
Securities and Exchange Commission (SEC) that it will not be able to meet the March 16 deadline for filing its annual results due to the need to reassess its business and strategies.
According to Silvergate, the company sold additional debt securities in January and February 2023, expecting to record further losses related to the depreciation of the securities portfolio.
In a media statement, a Silvergate spokesperson revealed that the negative events surrounding the bank could significantly impair its ability to function.
The bank is facing the forced sale of blocks of securities, as well as financial and reputational losses due to an investigation into the company’s activities by the US Department of Justice.
As of the end of last year, Silvergate’s debt could be over $4.3 billion. In December, a lawsuit was filed against Silvergate and its CEO Alan Lane in the Southern District of California.
The plaintiffs allege that the bank directly facilitated fraudulent activities on the FTX cryptocurrency exchange, and its clients used the exchange to launder money on a large scale.
The lawsuit also accuses the bank’s management of deliberately misrepresenting information about its business operations.
These financial difficulties have led Moody’s rating agency to downgrade Silvergate’s rating to “B3,” indicating a high degree of credit risk of the issuer.
The situation is alarming for Silvergate Bank, and it remains to be seen if the bank can recover from these challenges and continue to serve the cryptocurrency industry.