LedgerX Ditches Silvergate as Analysts Downgrade Stock Price

Silvergate’s share price “moved in line” with bitcoin’s performance for “most of 2021-22,” according to Kaiko analysts

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FTX’s LedgerX, the only subsidiary of the now-defunct exchange excluded from its bankruptcy and regulatory woes, told customers it will no longer accept wire transfers from Silvergate Capital. 

In an email sent to clients Wednesday, LedgerX instructed customers to instead use Signature Bank for wire transfers from March 1 onward.

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“Silvergate made a name for itself as the bank of choice for some of the largest crypto companies, most notably working with FTX, which accounted for around 10% of crypto-linked deposits,” research analysts from Kaiko wrote in a recent note. 

The switch comes amid a challenging time for Silvergate. In the wake of FTX’s collapse, customers pulled more than $8 billion from the bank, but Silvergate was able to survive by selling assets at a loss — with help from the Federal Home Loan Bank, a lender backed by private capital that supplies lines of credit to distressed companies. 

As of the end of 2022, Silvergate held $4.3 billion of short-term Federal Home Loan Bank advances. Shares of Silvergate, which briefly rose at the end of January, are now down more than 20% since the start of the year. 

“Due to its large crypto exposure, Silvergate’s share price moved in line with BTC returns for most of 2021-22. However, its correlation has weakened significantly in 2023 due to growing legal and regulatory risks around the bank’s dealings with FTX and Alameda,” Kaiko analysts added.

Crypto derivatives shop LedgerX, acquired by FTX’s US arm in October 2021, has been notably absent from FTX’s bankruptcy filings and other legal proceedings. LedgerX, registered with the CFTC since 2017, has so far escaped unscathed. 

Regulators have used the subsidiary as an example of which crypto companies should register with appropriate authorities. 

“We require, in permitting LedgerX to operate, that LedgerX comply with a number of conditions,” CFTC Commissioner Kristin Johnson said in a November appearance after the FTX collapse. “Not $1 of customer assets have been compromised, to the best of our knowledge.”

LedgerX did not respond to Blockworks’ request for comment.


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