Silvergate Shutters SEN Platform
Crypto bank Silvergate announced on March 3 that it is discontinuing its digital assets’ payment network, claiming the termination is a “risk-based decision”. The move comes after the bank’s stock dropped more than 59% in the previous five days due to fears of a possible bankruptcy.
On the same day, United States Judge Michael B. Kaplan ruled that Silvergate must return $9,850,000 deposited by BlockFi. According to documents posted on the website of BlockFi’s restructuring advisor, the court ordered the bank to immediately release the funds following a November 2022 agreement between the two companies.
Silvergate reportedly borrowed $3.6 billion from the Federal Home Loan Banks System (FHLB), a consortium of 11 regional banks across the United States that provide funds to other banks and lenders, in order to mitigate the effects of a surge in withdrawals.
The digital asset bank outlined steps taken to maintain cash liquidity, including wholesale funding and the sale of debt securities, in a report published by the United States Securities and Exchange Commission (SEC). The crypto bank is facing class-action lawsuits over its relationship with FTX and Alameda Research.
Fears of a liquidity crisis leading to bankruptcy protection increased this week after Silvergate delayed filing its annual 10K financial report. Within 24 hours of the announcement, cryptocurrency firms Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos announced that their partnerships with the bank would be scaled back in some way. MicroStrategy and Tether have joined a growing list of companies in publicly denying any meaningful exposure to the bank.
According to a February Short Interest Reporting, Silvergate stock was the second-most-shorted stock in the United States, with more than 72.5% of its shares being shorted.
(With inputs from Shikha Singh)
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