Crypto Companies Cutting Ties with Embattled Silvergate

California’s Silvergate Bank is facing a wave of withdrawals from crypto-related businesses amid scrutiny of its ties to FTX and other failed cryptocurrency firms.

It comes as the bank said it was assessing its “ability to continue as a going concern” after incurring a heavy financial loss in 2022.

Major cryptocurrency exchanges including Coinbase, Bitstamp, Cboe Digital, and Circle, as well as digital asset businesses Paxos and Galaxy, all announced last week that they were pausing, reducing, or halting business with Silvergate.

Silvergate has yet to comment on any of the withdrawals, but has delayed the filing and publication of its annual report as it continues to analyze the impact of cryptocurrency market turmoil on its deposit base, according to a filing with the Securities and Exchange Commission (SEC).

In the fourth quarter of 2022 the bank reported that its total deposits had fallen from $13.2 billion to $6.3 billion in the space of just three months.

Last week Silvergate Capital Corporation — the bank’s holding company — told the SEC that it “requires additional time to perform analysis, record journal entries related to subsequent events and to complete management’s evaluation of internal controls over financial reporting”.

“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,” Silvergate stated. “The company is currently in the process of re-evaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”

Since the start of 2023, Silvergate’s share price has fallen from $17.27 to $5.07, a decline of more than 70%. In the 12 months to March 3, the share price has collapsed by almost 96%.

Silvergate suspended dividend payments on January 27 as part of a “focus on maintaining a highly liquid balance sheet with a strong capital position”. It previously announced that it was laying off approximately 200 staff.

The bank’s financial results for the fourth quarter of 2022 revealed a net loss for the year of almost $950 million. In its latest SEC filing, the company said “a number of circumstances have occurred” since the start of 2023 that “will negatively impact the timing and the unaudited results previously reported” in the Q4 release.

The company also said it “expects to record further losses related to the other-than-temporary impairment on the securities portfolio”, affecting its regulatory capital ratios. This “could result in the company and the bank being less than well-capitalized”, it said.