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Thursday, February 22 2024
Markets

Traditional US bank Silvergate collapses after stock plunges

Traditional US bank Silvergate collapses after stock plunges
Photo Credit : IANS

San Francisco: The fall of cryptocurrency exchange FTX and an over-all meltdown in the global crypto market has claimed another victim with established US bank Silvergate Capital — a lender of choice to startups and tech firms — going into voluntary liquidation.

Silvergate, a traditional bank founded in 1987, lent out most of its funds to crypto exchanges and the collapse of $32 billion FTX run by Sam Bankman-Fried (SBF).

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of bank operations and a voluntary liquidation of the bank is the best path forward,” the bank said in a statement.

As part of its winding down proceedings, the bank plans to ensure “full repayment of all deposits” for customers.

The shares of the bank nosedived 60 per cent late on Thursday, wiping some $80 billion in value from the bank’s shares.

US Senator Elizabeth Warren said in a tweet that as the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable.

“I warned of Silvergate’s risky, if not illegal, activity – and identified severe due diligence failures. Now, customers must be made whole and regulators should step up against crypto risk,” Warren said.

Silvergate’s shares have fallen 97 per cent from its all-time high in November 2021.

“Concerns have been raised around the financial health of the tech-focused bank, which services the likes of crypto-friendly VCs such as Sequoia and a16z,” according to Cointelegraph.

In its latest financial update, Silvergate disclosed it sold $21 billion worth of its securities holdings for a $1.8 billion loss to shore up its balance sheet aimed at raising additional capital.

It also raised $500 million from venture firm General Atlantic and is seeking to raise another $1.75 billion in sales of its shares, for a total of $2.25 billion.

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