Crypto’s favourite bank, Silvergate, is sailing through a problematic financial storm following a wave of partnership terminations and rumoured investigation linked to the defunct FTX.
Coinbase, Circle, Bitstamp, Paxos, and Galaxy Digital are the latest in a growing list of Crypto companies severing ties with the once-preferred Crypto gateway bank.
Coinbase and Galaxy had labelled the action precautionary, while Paxos “discontinued all transfers.” Bitstamp outrightly warned users that future deposits are “at owners’ risk,” and a discontinuation of transaction services is currently underway for Circle.
Trouble started for Silvergate last quarter after news of the FTX collapse broke out. For nearly three years, the U.S.-based licensed bank had flung its doors to full-scale crypto deposit acceptance, gaining over $4.3 billion in crypto customer deposits and offering a broad range of traditional finance services to crypto projects. Its partners also included FTX, giving it significant exposure to Sam Bankman-Fried’s exchange and leaving it with a widening Blackmore in its finances on the hill of the collapse.
In weeks, the Alan Lane-led bank processed close to $8 billion in customer withdrawals, leaving it without over two-thirds of its reserve deposits. Less than $398 million is left off the $14.1 billion worth of digital currency assets it had held at the start of last year. Silvergate is a takeover target, many analysts believe.
The Bank had announced a two-week delay in releasing its annual report adding that it strongly considers its chances of surviving as a going concern. To keep afloat over the last few months, it had to sell derivatives and securities at a $718 million loss and cut back 40% of its workforce at the start of the new year.
In addition to its financial woes, a slew of litigations claiming it had covertly encouraged the billion-dollar scam perpetrated by FTX has been targeted at the company and its CEO, Alan Lane. It would also have to defend itself against the US Department of Justice, which is looking to see what role it may have played in managing SBF’s account as a customer.
Its stock is already been downloaded by JPMorgan and Canaccord, as the price slumped over 55%—the highest ever recorded—since the announcement and is currently valued at $5.72 at the time of publication.
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