Silvergate stock plunges 31% after delayed filing raises doubts over future

March 1, 2023 Coin Telegraph

10-K

Crypto-friendly bank Silvergate has delayed its 10-K filing, which reveals the financial health of the company. The news has sent its stock price down 31%.

Silvergate Bank has announced that it will delay the filing of its annual 10-K report, which has sent its stock price down over 30% after hours.

A 10-K report is a document required by the Securities and Exchange Commission which provides a comprehensive overview of the company's business and financial condition. The crypto bank stated that it would need an additional two weeks to complete the report for the 2022 fiscal year.

Silvergate explained in its late filing notice that it sold additional debt securities in January and February and expects to record further losses in the coming months.

"These additional losses will negatively impact the regulatory capital ratios of the Company and the Company's wholly owned subsidiary, Silvergate Bank (the "Bank"), and could result in the Company and the Bank being less than well-capitalized," the firm stated in its late notice filing.

"In addition, the Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements," said the company adding:

The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.

The crypto bank added that they're process of conducting additional procedures and providing documentation as requested by its independent registered public accounting firm to complete a series of audits.

Silvergate explained that a number of factors have, or will have an impact on the financial health of the firm in the near future.

Among those include the substantial market volatility experienced in Q4 2022, several high-profile bankruptcies in 2022 which has disrupted investor confidence in cryptocurrencies and stricter regulatory oversight on banks offering digital asset services.

The firm added that customer retention may be an issue, in addition to any potential liabilities or restrictions of the company that may be brought about by litigation.

Silvergate's death spiral is going to be rough for crypto.

I don't think retail investors realize how much market maker money moved around quickly via SEN, and how many crypto exchanges were/are banking with them.

Stock almost down to its ATL after hours.
— Adam Cochran (adamscochran.eth) (@adamscochran) March 1, 2023

This is a developing story and more information will be added as it becomes available.

US Federal Reserve denies Custodia Bank’s request for Fed supervision

February 23, 2023 Coin Telegraph

application

The Federal Reserve Board has denied the request from crypto-focused Custodia Bank to reconsider its membership to the Federal Reserve System.

The United States Federal Reserve has denied a request from cryptocurrency bank Custodia Bank to reconsider its membership application to the Federal Reserve System.

The Fed announced its denial on Feb. 23 saying the Federal Reserve Board previously decided that Custodia’s application “was inconsistent with the required factors under the law.”

@federalreserve announces it has denied the request by Custodia Bank, Inc., for reconsideration of the Board’s decision last month on its application to be supervised by the Federal Reserve: https://t.co/ZYNUEoLeN1
— Federal Reserve (@federalreserve) February 23, 2023

In January, the Fed rejected Custodia’s application to become a member. Board rules allow applicants to request a reconsideration of membership decisions.

At the time of the initial rejection, the Fed claimed Custodia had an “insufficient” management framework.

It also cited a joint declaration it made alongside the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) that claimed cryptocurrencies were “inconsistent with safe and sound banking practices.”

Custodia has said it wishes to join the Federal Reserve System so it can be regulated under the standards that apply to traditional banks and open a path for other crypto-banks that wish to be held to those same heightened standards.

Silvergate Capital Incurs Loss of $1 Billion in Q4 of 2022

January 20, 2023 Bitcoin.com

Crypto Bank Silvergate Capital Posts Staggering $1,000,000,000 Loss Last Quarter Due to Bear Market

January 17, 2023 The Daily Hodl

FTX Collapse Triggered $8,100,000,000 in Withdrawals at Crypto-Friendly Bank Silvergate: Report

January 5, 2023 The Daily Hodl

Approach with caution: US banking regulator’s crypto warning

December 9, 2022 Coin Telegraph

Banking

The Office of the Comptroller of the Currency (OCC) said the digital asset industry was maturing but was “not yet robust” in its risk management.

A United States banking industry regulator warned banks of the “emerging risks” of cryptocurrencies saying the sector should take a “cautious approach” and seek permission in some cases when engaging with crypto or crypto firms.

Citing “dislocations” in the crypto market over 2022 the Office of the Comptroller of the Currency (OCC) highlighted what it said were “several key risks” of crypto in its Dec. 8 Semiannual Risk Perspective for Fall 2022 report.

Its three main concerns are that “stablecoins may be unstable,” the crypto industry lacks mature risk management practices and has a high risk of contagion due to the “high degree of interconnectedness.”

Check it out! The @USOCC reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2022. Read more at https://t.co/CcfoiQM8xe pic.twitter.com/0WnAt5psXU
— OCC (@USOCC) December 8, 2022

The space’s lack of “consistent or comprehensive regulation” and the volatility of crypto along with the increased range of firms offering “bank-like products and services” using crypto and tokenized assets were also cited as concerns, which the OCC believes raises questions regarding financial stability.

The depeg and collapse of the TerraClassicUSD (USTC) algorithmic stablecoin in May was given as an example of stablecoins’ “run risk,” and how asset-backed stablecoins also saw minor depeg events as a result.

It highlighted stablecoin backings have “incrementally evolved” since, but believes most “remain susceptible to run risk.”

Discussing risk management the OCC said practices at crypto firms were maturing but are “not yet robust” with firms appearing “unprepared for the stresses and surprises” over the past year that saw losses for millions of investors, it added:

“Hacks and outages are frequent, and fraud and scams remain high throughout the industry. In some cases, ownership rights, custody arrangements, and financial representations have created a high degree of confusion.”

The crypto market over 2022 also revealed the industry’s “interconnectedness [...] through a variety of opaque lending and investing arrangements” according to the OCC.

It remarked crypto participants “may be engaging in highly leveraged trading” which resulted in the noted contagion risk.

In its advice to banks, the OCC said institutions considering engaging with crypto or crypto companies “should take a careful and incremental approach.”

The OCC advised national banks that crypto-related plans should be discussed “with their supervisory office” before they engage in any activities as some potentially require permission.

Crypto companies have moved to improve transparency in the wake of the bankruptcy of FTX with many exchanges introducing proof-of-reserves so users can verify crypto backings along with some conducting public third-party audits.

Silvergate denies recent FUD, confirms minimal exposure to BlockFi

November 29, 2022 Coin Telegraph

Bankruptcy

Silvergate Capital has been quick to distance itself from the now-bankrupt crypto lender BlockFi.

Institutional crypto services provider Silvergate Capital has confirmed its minimal exposure to the embattled BlockFi crypto lending firm.

On Nov. 28, Silvergate announced that its deposit relationship with BlockFi is “limited to less than $20 million of its total deposits from all digital asset customers.” Those deposits totaled $13.2 billion in Q3 according to the firm’s revenue report.

It added that BlockFi was not a custodian for its Bitcoin-collateralized leverage loans and the firm has no investments in BlockFi.

To quell investor jitters, Silvergate CEO Alan Lane said, “as the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility.”

Silvergate Provides Statement on Minimal Exposure to BlockFi https://t.co/FoBqzylpr6
— Silvergate Bank (@silvergatebank) November 28, 2022

Silvergate has been the subject of a lot of FUD (fear, uncertainty, and doubt), or “false and misleading statements,” in its words.

On Nov. 29, technical analyst and Swiss investor Walter Bloomberg told his 622K Twitter followers “Silvergate Capital said to have lent money to BlockFi,” but failed to provide any evidence.

Others have added to the FUD fest with several Tweets over the past week, however, most of them were lacking specifics.

On Nov. 28 Cointelegraph reported that BlockFi had become the latest victim of the FTX contagion to file for Chapter 11 bankruptcy.

The filing stated that BlockFi has more than 100,000 creditors, assets between $1 billion and $10 billion, and similar liabilities. The latest high-profile crypto bankruptcy appears to have fuelled this recent round of FUD, which Silvergate has seen fit to refute.

Earlier this month, the WSJ ran an article on Silvergate claiming that the company was battling the contagion fears. The crypto bank has seen its stock prices plunge this year but that has been the case for most publically listed crypto companies.

SI prices declined 11.1% on the day to finish at $24.45 in after-hours trading according to Market Watch. Silvergate stock has slumped 83.6% since the beginning of the year.

On Nov. 23, Cointelegraph reported that Block.one CEO, Brendan Blumer, had purchased a stake in Silvergate Capital.

German Crypto Bank Nuri Asks Clients to Withdraw Funds as It Goes Out of Business

October 20, 2022 Bitcoin.com

German crypto bank Nuri tells 500K users to withdraw funds ahead of shut down

October 19, 2022 Coin Telegraph

Bankrupt crypto firm

Nuri will maintain crypto trading services until the end of November, and has encouraged users to withdraw their assets before the mid-December deadline.

German crypto bank Nuri has told its 500,000 users to withdraw funds from their accounts as the firm prepares to shut down and liquidate the business, marking it as another victim of the 2022 bear market.

Nuri first reported liquidity issues in August, after announcing that it had filed for insolvency amid the economic strains of Crypto Winter. It said at the time that business would continue as usual, as it worked on a restructuring plan and securing a buyout, however an acquisition has failed to materialize.

In an Oct. 18 blog post, Nuri CEO Kristina Mayer noted that despite the company’s best efforts, it is unable to maintain its operations moving forward.

Nuri is closing down its business operations. We ask our customers to withdraw their funds and assets as of 18.12.2022. Thank you for having been part of the Nuri community!

Here is a letter of our CEO Kristina Walcker-Mayer: https://t.co/gdOOeoOKDs
— Nuri (@NuriBanking) October 18, 2022

Unlike bankrupt crypto lender Celsius which locked user withdrawals before everything went south, Nuri is encouraging users to withdraw all of their assets before the Dec. 18 deadline.

“Customers have access and will be able to withdraw all funds until the aforementioned date. All assets in your Nuri account are safe and unaffected by Nuri’s insolvency. Trading will be possible until 30/11/2022,” the post reads.

Mayer explained that “this year, the challenges have become insuperable due to the tough economical and political environment of the past months, which kept us from raising new funds or finding an acquirer,” and added:

“On top, the insolvency of one of our main business partners worsened the situation significantly and put us over the edge. As a result, Nuri had to file for temporary insolvency in August this year.”

While Mayer didn’t specifically name its insolvent business partner, Celsius appears to be the prime candidate as it had partnered with Nuri to offer Bitcoin (BTC) interest accounts to its customers. These accounts were halted when Celsius went towards bankruptcy.

Mayer also noted that the company is still bullish on the potential of blockchain-based financial services.

“We still believe in innovative financial technology and are convinced that blockchain, cryptocurrency and decentralized finance will offer opportunities that add true value to the lives of people. Still, financial innovation should be safe, understandable and easy to use for as many people as possible,” Mayer wrote.

Circle CEO Jeremy Allaire Says Company Intends To Become Full Reserve Digital Currency Bank

October 3, 2022 The Daily Hodl

Crypto-Bank