Silvergate Reveals Intent To ‘Wind Down’ Operations

Coinbase’s move to cut ties with Silvergate looks prescient right about now


KanawatTH/ and Silvergate modified by Blockworks


Crypto bank Silvergate is calling it quits. 

The company said Wednesday it intends to “wind down operations” and voluntarily liquidate the bank, calling it “the best path forward.”

“The bank’s wind down and liquidation plan includes full repayment of all deposits,” Silvergate said

That process, according to Silvergate, involves “considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”

Centerview Partners is set to be a financial adviser for the bank. Cravath, Swaine & Moore will act as Silvergate’s legal adviser, while Strategic Risk Associates, a consultancy firm, is providing assistance with the transition.

Silvergate’s stock fell nearly 6% during the trading day Wednesday — and plummeted an additional 36% in early after-hours trading in New York.   

The crypto bank booked a $1 billion fourth-quarter loss and slashed its workforce by 40% in January. It said at the time it was forced to sell assets at a major loss during the quarter to fulfill roughly $8 billion of customer withdrawals.

More recently, Silvergate shuttered its exchange network, SEN. 

“All other deposit-related services remain operational as the Company works through the wind down process,” the company said in its Wednesday statement. “Customers will be notified should there be any further changes.”

The stock fell 30% in after-hours trading on March 1 after the company said it would delay filing its annual report with the SEC. The next day, Coinbase moved to cease transfers to and from Silvergate “out of an abundance of caution.”

“The situation with Silvergate shows just how the contagion effect from FTX continues to rumble on, and how investors’ exposure to the centralized exchange model can blow up,” said Josef Tetek, a bitcoin analyst at Trezor, a hardware wallet company. “When things go bad, that exposure is a risk that is passed on to crypto investors extremely broadly.”

Data from analytics firm S3 Partners found earlier this week that nearly 87% of Silvergate’s shares were then shorted — the highest percentage of any US publicly listed company with at least $50 million of short interest.

About 3.7 million new Silvergate (SI) shares — roughly $20 million — sold short in the past 30 days, Ihor Dusaniwsky, S3 Partners’ managing director of predictive analytics, told Blockworks Tuesday.

Updated March 8 at 5:41 pm ET: Additional context detailing Silvergate’s financial standing throughout, including price action on its stock, as well as corresponding short interest.

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