Stock Drops For Popular But Troubled Crypto Bank

Silvergate Bank, a crypto-friendly bank, experienced a 31% drop in its stock after it delayed filing its annual 10-K report with the US Securities and Exchange Commission (SEC). Silvergate Capital Corporation, the parent company of Silvergate Bank, notified the agency that it requires additional time for an independent accounting firm to complete certain audit procedures. The bank also cited several factors that would negatively impact the timing of the 10-K report, including the sale of additional investment and debt securities, beyond what was previously anticipated, from which Silvergate expects to record further losses.

These additional losses could negatively impact the regulatory capital ratios of Silvergate Bank and the parent company, which could result in the bank and the company being less than well-capitalized, according to Silvergate. As a result, Silvergate’s stock, which closed at $13.53, plunged by 31.7% in after-hours trading, dipping well below $10.

In the last quarter of 2022, Silvergate reported a $1 billion net loss as well as a decline in customer deposits of roughly $14 billion, citing the planned reduction in digital asset banking deposits alongside industry-wide chaos. The bank’s deposits were affected in the aftermath of the FTX collapse, prompting it to tap the Federal Home Loan Bank (FHLB) for a $4.3 billion loan in January and to sell roughly $5.2 billion in debt securities, according to the company’s filings.

Silvergate Bank, which was hit with a class action lawsuit alleging that it directly aided FTX’s fraudulent activities in December, is also one of the most shorted stocks on Wall Street. As much as 71% of all shares available for investors to buy and sell are short positions, according to MarketWatch.

Silvergate stated in its Wednesday filing with the SEC that it is currently analyzing certain regulatory and other inquiries and investigations that are pending with respect to the company. The bank is also reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.

Silvergate Bank is a cryptocurrency-focused bank that provides various financial services to its clients, including digital currency lending and custody, wire transfers, and deposits. The bank, which is headquartered in San Diego, California, serves over 1,000 digital currency customers, including crypto exchanges and institutional investors, such as hedge funds and venture capital firms.

Silvergate Bank was founded in 1988 and went public in November 2019. Its stock price has been volatile since then, reaching an all-time high of $175.15 in February 2021 and dropping to $13.53 in March 2023. The bank’s customers include Circle, Bitstamp, and Coinbase. The bank has also partnered with several companies to develop digital currency-based financial products, such as Fidelity Digital Assets and Diem Association.


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