Silvergate Bank Enforcement Action Terminated
The Federal Reserve Board announced the termination of an enforcement action against Silvergate Bank and its holding company, Silvergate Capital Corporation, as per a July 26 press release.
The action, which was in effect since May 2023, mandated the bank to liquidate and wind down its operations in a manner that safeguarded its depositors.
Following the successful completion of its liquidation and wind-down plan, Silvergate has repaid all deposits to its customers and ceased operations as a bank. This marks a significant milestone for the bank, which has faced challenges since its collapse in March 2023.
Silvergate Bank Collapse
Silvergate Bank, previously known for its strong connections to the crypto industry, experienced a dramatic downfall after the collapse of FTX in late 2022.
The bank’s collapse was preceded by financial troubles, with its stock becoming the second-most shorted on Wall Street by February 2023, with 72% of its shares borrowed for short positions.
In early March 2023, Silvergate delayed the release of its 10-K form, leading to a 31% drop in stock value. On March 8, 2023, the bank announced its collapse, citing fallout from the FTX debacle and withdrawal pressure from major clients.
Federal Oversight
After the collapse, the Federal Reserve Board oversaw Silvergate’s self-liquidation plan to ensure maximum customer reimbursements. Despite federal oversight, the bank faced lawsuits challenging the liquidation plan.
In August 2023, amidst the liquidation and legal issues, CEO Alan Lane and other executives resigned. Despite the enforcement action termination, Silvergate continues to deal with legal challenges.
In March, a class-action lawsuit proceeded against the firm, alleging complicity in fraud with FTX. In May, the SEC filed a lawsuit against Silvergate, settling for $50 million in June.
