Silvergate collapses after annual report postponement, warning about viability

  • Silvergate says it could be “less than well capitalized”.
  • Stock drops 31% after hours

March 1 (Reuters) – Cryptocurrency-focused lender Silvergate Capital warned it was delaying its annual report, saying it was evaluating its ability to operate as a going concern on Wednesday, causing its shares to fall more than a quarter in after-hours trading.

Silvergate reported a $1 billion loss for the fourth quarter as investors scrambled to withdraw deposits in the wake of crypto exchange FTX’s bankruptcy, and the company’s troubles highlight the fragility of trust in digital assets.

The company said it would not be able to meet the extended March 16 deadline for filing its annual report. It also said, in a filing with the Securities and Exchange Commission, that it had sold additional debt securities this year to pay down debt and that further losses mean the bank could be “less than well capitalized”.

Silvergate is “assessing the impact of these subsequent events on its ability to continue as a going concern,” the company said. “The company is currently re-evaluating its operations and strategies in light of the business and regulatory challenges it currently faces.”

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Shares fell nearly 32% to $9.24 in after-hours trading, suggesting the stock could open Thursday at a three-year low.

Silvergate’s stock is down about 96% from its all-time high in November 2021.

Federal prosecutors in Washington are investigating La Jolla, California-based Silvergate and its dealings with FTX and trading firm Alameda Research. In January, three US senators asked Silvergate for details about its risk management and FTX.

Wayne Huang, co-founder and CEO of XREX, a global USD crypto exchange headquartered in Taipei, said the issues highlighted how interconnected and vulnerable crypto banking had become.

“This emphasizes the importance of a robust banking network for crypto companies, rather than over-reliance on just a few banks,” he said. Broader digital asset markets have been relatively calm, though bitcoin made little headway despite a decline in the US dollar, last buying at $23,457.

“From what we’ve gathered, most crypto companies have already had to look elsewhere for banking, so we think the damage is probably already done in terms of implications for the broader crypto market,” said Matthew Dibb, chief investment officer at cryptocurrency asset manager Astronaut Capital. .

Global cryptocurrency exchange Binance secretly accessed an account at Silvergate that belonged to its supposedly independent US partner and transferred large sums of money from the account to a trading firm managed by Binance CEO Changpeng Zhao, Reuters reported last month.

Reporting by Noel Randewich; Additional reporting by Rae Wee and Tom Westbrook in Singapore. Edited by Lincoln Feast.

Our Standards: The Thomson Reuters Principles of Trust.


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