- Silvergate Capital filed for bankruptcy on September 18, 2024, in the state of Delaware.
- The bank, closed in March 2023, will not pay distributions to common shareholders.
- Regulatory investigations and the collapse of the cryptocurrency market caused Silvergate’s financial failure.
Silvergate Capital, the parent company of Silvergate Bank, filed for bankruptcy in Wilmington, Delaware, on September 18, 2024. This filing marks a significant chapter in the bank’s turbulent history following its abrupt shutdown in March 2023.
The bankruptcy petition, filed under In Re: Silvergate Capital Corp in the U.S. Bankruptcy Court for the District of Delaware, No. 24-12158, seeks to complete the company’s liquidation and resolve outstanding liabilities.
With approximately $163 million in cash on hand, Silvergate Capital intends to pay holders of bonds and preferred shareholders but does not anticipate any recovery for common shareholders.
Rapid growth and sudden collapse of Silvergate
Silvergate Bank experienced extraordinary growth as the cryptocurrency market surged. Deposits at the bank rose sharply from $1.8 billion at the end of 2019 to $14.3 billion by the end of 2021, driven largely by digital-asset exchanges, which accounted for roughly 58% of total deposits.
This rapid expansion underscored Silvergate’s prominent role in the growing crypto industry. But the bank’s fortunes began to reverse when the cryptocurrency market suffered a severe downturn in 2022.
High-profile failures, including the collapse of the FTX cryptocurrency exchange, sparked a mass withdrawal of more than $8 billion from Silvergate. That exodus forced the bank to sell long-term debt securities at steep losses, further worsening its financial position.
By March 2023, the pressure became unsustainable, prompting Silvergate to wind down operations and return deposits to its customers.
Regulatory scrutiny and financial settlements
Regulatory oversight compounded Silvergate’s troubles. In 2023, the bank faced intensive examinations by U.S. regulators, including the Federal Reserve, the California Department of Financial Protection and Innovation, and the Securities and Exchange Commission (SEC).
Those investigations highlighted deficiencies in the bank’s anti-money-laundering controls and identified misleading statements by senior executives.
To resolve these issues, Silvergate agreed to a $63 million settlement. In its bankruptcy filing, Silvergate Capital emphasized that customer deposit obligations were met in full, and the Federal Deposit Insurance Corporation (FDIC) did not bear costs related to the deposit repayments.
The company is now moving to complete the liquidation process, using remaining cash to address creditor claims.
Despite these efforts, the fate of common shareholders remains uncertain, and it is unlikely they will receive any distribution.