Silvergate Bank has announced that it has fully repaid all remaining deposit liabilities as part of its voluntary liquidation plan. The bank suffered heavy losses from the collapse of the crypto exchange FTX in 2022.
The California-based bank, known for its crypto-friendly services, has said that it has fully repaid all remaining deposit liabilities as part of its plan to wind down operations. The bank, which decided to liquidate earlier this year voluntarily, said it now holds less than $10,000 in assets.
On Wednesday, the bank issued a statement saying that it has fully repaid all remaining deposit liabilities as of November 21, 2023. The bank said it used its positive cash and equivalent balances to repay the deposits, which amounted to $3.8 billion at the end of 2022.
The bank also said that it continues to focus on implementing the bank liquidation, which it announced in March 2023. However, the bank warned that it still faces potential liabilities resulting from litigation, regulatory matters, and investigations.
The bank’s decision to liquidate
The bank’s decision to liquidate came after it suffered massive losses stemming from the collapse of the crypto exchange FTX in November 2022.
FTX, which was one of the largest and most popular crypto exchanges in the world, went bankrupt after a series of hacks, frauds, and regulatory actions.
Silvergate Bank was among the lenders hit hardest by the fall of FTX, as it had a large exposure to the exchange and its customers. The bank experienced a bank run following the collapse of FTX, as users rushed to withdraw their funds from the bank.
The bank had to sell $5.2 billion of debt securities it held on its balance sheet at a significant loss to cover around $8.1 billion in user withdrawals.
As a result, the bank incurred a $718 million loss in 2022, which reportedly exceeded the bank’s total profits since 2013. According to its financial statements, the bank’s deposits also declined from $11.9 billion in 2021 to $3.8 billion in 2022.
The implications of the bank’s liquidation
The bank’s liquidation is another sign of the impact of the 2022 crypto meltdown and its ripple effects on traditional finance firms.
Some major crypto-friendly banks collapsed earlier this year amid a banking crisis partly attributed to the crypto market crash and its aftermath.
- Crypto Bank, a Swiss bank that offered crypto services to institutional and retail clients, filed for bankruptcy in February 2023 after losing $1.7 billion in a fraud scheme involving a fake stablecoin.
- Nexo, a crypto lending platform that also operated as a bank, which shut down in April 2023 after facing a class-action lawsuit from its customers who claimed that the platform liquidated their collateral without proper notice during the market crash.
The bank’s liquidation also raises questions about the future of crypto banking and the challenges and opportunities it faces in a rapidly evolving and uncertain environment.
As the crypto industry grows and matures, it will need to find ways to balance innovation and regulation, security and convenience, and risk and reward.
