Troubled Silvergate in discussion with FDIC to avoid bankruptcy
- FDIC examiners arrived at Silvergate’s headquarters at La Jolla, California office last week.
- As per sources, one possible option involves lining up crypto-industry investors to help Silvergate stabilize its liquidity.
Struggling digital asset bank, Silvergate is reportedly in talks with regulators to avoid a potential bankruptcy. According to a March 7 Bloomberg report, the Federal Deposit Insurance Corporation(FDIC) officials have been discussing with Silvergate ways to save the company from liquidity issues.
Reportedly, FDIC examiners arrived last week at Silvergate’s headquarters at La Jolla, California offices. Since then, FDIC officials have reviewed the firm’s books and records. As per the sources, the company has yet to make a decision on how to deal with its deepening financial turmoil. However, one source mentioned in the report pointed out that one possible option involves lining up crypto-industry investors to help Silvergate increase its liquidity.
The latest development comes amid the bank delaying filing of its annual 10-K report, causing its stock to plummet further. Just hours after the announcement of the delay, leading crypto firms Coinbase, Galaxy Digital, Paxos, Circle, Gemini, and BitStamp dropped Silvergate Capital Corp as their banking partner.
Last week, Silvergate Capital Corp also announced that it had made a “risk-based decision” to discontinue its payments network called the Silvergate Exchange Network,
Silvergate’s liquidity issues spiked following the implosion of Sam-Bankman Fried’s FTX empire in November. The company reported a net loss of $1 billion in the fourth quarter as investors triggered by the FTX collapse pulled out more than $8 billion in deposits in the last three months of 2022.
Silvergate revealed on January 5 that it had obtained $4.3 billion of short-term advances from the San Francisco FHLB. The latest filing said it sold bonds in January and February and expects to record further losses on its securities portfolio.
As per reports, the U.S. Department of Justice’s fraud unit was also probing the crypto bank’s dealings with the now-bankrupt FTX and Alameda Research. The news of the investigation triggered the stocks to plummet even further. According to Google Finance data, the current Silvergate stock is priced at $5.21, down 70% over the past month.