Silvergate Bank
| File:Silvergate Bank (logo).svg | |
| File:San Diego 4250 Executive Square c.jpg | |
| Company type | Public |
|---|---|
| Template:OTC Expert | |
| Industry | |
| Founded |
|
| Founders | Dennis Frank and Derek J. Eisle (1996 re-capitalization) |
| Defunct | 2023 (announced winding down) |
| Fate | Voluntary liquidation in Chapter 11 bankruptcy |
| Headquarters | , U.S. |
Area served | Worldwide |
Key people | |
| Products | |
| Website | silvergate |
.svg){kind=link}
Silvergate Bank was established in California in 1988. It began catering to cryptocurrency clientele starting in 2016 and completed its IPO in 2019. Following a downturn in cryptocurrency prices and the bankruptcy of FTX in November 2022, concerns about the bank intensified.[1][2][3][4] In March 2023, Silvergate revealed its intention to cease operations and proceed with liquidation.[5] Its collapse was among the earliest during the 2023 United States banking crisis.
Foundation and growth
Originally, Silvergate Bank operated as a savings and loan association.[6][7] In 1996, Dennis Frank and Derek J. Eisele recapitalized the institution, transforming it into a bank that began as a community-focused entity with three branches within the San Diego metropolitan area.[6][8]
Alan Lane, the CEO, made an investment in Bitcoin in 2013, which prompted the bank to start serving cryptocurrency customers by 2016.[6][9] The bank experienced rapid growth, reaching $1.9 billion in assets and acquiring 250 clients by 2017.[6] Silvergate went public in November 2019 at $13 per share; by November 2021, its stock price had soared by 1,580% to $219 during the Cryptocurrency bubble#2020–2022 cryptocurrency bubble.[10][9]
Silvergate Exchange Network and Diem acquisition
Silvergate managed the Silvergate Exchange Network (SEN), a real-time payment platform that allowed cryptocurrency exchanges, institutions, and customers to transfer traditional currencies such as US dollars and euros. It was one of the pioneering regulated banks to create such a system. By the third quarter of 2022, SEN held $12 billion in deposits from 1,677 clients, encompassing all major cryptocurrency exchanges alongside more than 1,000 institutional investors.
In 2021, Silvergate aimed to introduce its own U.S. dollar-backed stablecoin, acquiring the technology behind Meta Platforms' Diem in January 2022 for approximately $200 million to advance this project. Initially, Silvergate had intended to serve as a principal issuer of Diem for Meta. Nevertheless, by late 2022, the stablecoin had yet to be launched.
At that period, Silvergate's executive team included CEO Alan Lane, president Ben Reynolds, and chief credit officer Derek J. Eisele.
FTX involvement, liquidity decline, and cessation of operations
In the latter part of 2022, amid falling cryptocurrency valuations and the downfall of platforms such as FTX, apprehensions surfaced regarding Silvergate's vulnerability due to lost deposits and credit risks linked to SEN leverage. Given Silvergate's central position within the crypto industry, there were concerns about wider repercussions. Certain short sellers predicted the possibility of a bank run. By December 2022, Silvergate's stock value had plummeted by 89% from its November 2021 high, reaching $25, while deposits dramatically decreased from $9.8 billion in November to $3.8 billion.
Silvergate asserted that it preserved sufficient liquidity, held deposits solely from FTX without extending loans to the exchange, and was under investigation by Senators Elizabeth Warren, Roger Marshall, and John Kennedy concerning its connections with FTX.
On March 8, 2023, Silvergate Bank declared its intention to cease operations and proceed with liquidation. Later, on September 18, 2024, Silvergate Capital submitted a filing for Chapter 11 bankruptcy protection, reporting assets valued between $100 million and $500 million alongside liabilities ranging from $10 million to $50 million.
- ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedwsj-contagion - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedmotley-fool-bank-run - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedbloomberg-ftx - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedconcerns-yahoo - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedliquidation - ↑ 6.0 6.1 6.2 6.3 Cite error: Invalid
<ref>tag; no text was provided for refs namedhistory1 - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedFDIC Silvergate - ↑ Cite error: Invalid
<ref>tag; no text was provided for refs namedsan-diego-edu - ↑ 9.0 9.1 Cite error: Invalid
<ref>tag; no text was provided for refs namedcnn-history