Silvergate Bank, the La Jolla-based regional lender that carved out a once-lucrative niche for itself by catering to the crypto industry, will wind down its operations amid ongoing turmoil in digital currency markets.
Silvergate officials on Wednesday announced in a statement that a “voluntary liquidation of the bank is the best path forward.” Bank officials vowed to return all of its investors’ funds “in an orderly manner.”
The news sent the firm’s stock stock (NYSE: SI) down nearly 50% in after-hours trading to less than $3 a share. During the past year, Silvergate’s stock has plummeted 96%. Prior to the collapse of crypto exchange FTX, the bank’s shares were trading as high as $200.
“The Department of Financial Protection and Innovation is monitoring the situation closely to facilitate the safe and expeditious voluntary liquidation of Silvergate Bank,” said California Department of Financial Protection and Innovation Commissioner Clothilde Hewlett. “The Department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant Federal counterparts.”
Established in the late 1980s, in the past few years Silvergate had developed into the largest cryptocurrency bank in the U.S., attracting as much as $14 billion in customer deposits.
Last week the bank warned in a filing that it might be forced to close, blaming growing problems in part on pending investigations into its operations. The filing also confirmed previous reports that it was being investigated by the U.S. Department of Justice.