California-based Silvergate Capital is set to finally close its doors for good after the Federal Reserve approved its plan for winding up.
Silvergate has until June 6 to produce a wind-up plan acceptable to California’s Department of Financial Protection and Innovation and the Federal Reserve Bank of San Francisco, according to a notice from the Fed.
The notice also made reference to state regulators having identified “numerous deficiencies, including with respect to both safety and soundness and compliance with banking laws and regulations” from their most recent examinations of Silvergate.
Silvergate announced in early March that it planned to wind up its operations after experiencing significant deposit outflows in the first two months of 2023.
These were “in part” triggered by the collapse of crypto trading group FTX towards the end of 2022, the Fed’s notice said. Silvergate provided depository services to FTX, although in November, CEO Alan Lane said Silvergate’s exposure was “less than 10%” of its total deposit base.
The fallout from FTX and subsequent rapid decline in confidence in cryptocurrency markets led to a number of other crypto companies pausing or ceasing business relationships with Silvergate in late February and early March this year.
The bank announced its plan for a “voluntary liquidation” on March 8, with regulators set to monitor the process closely amid ongoing investigations.
Silvergate has not made any formal announcements since confirming the receipt of a non-compliance notice from the New York Stock Exchange on March 20, relating to its failure to file an annual report.
The liquidation statement from early March stated: “The bank’s wind down and liquidation plan includes full repayment of all deposits. The company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”