Silvergate Examining Viability as a Business Amid FTX Investigations

Silvergate Capital’s cryptocurrency industry ties now have it examining whether it can remain in business.

The bank announced in a filing with the Securities and Exchange Commission (SEC) Wednesday (Mar. 1) that it was delaying its annual report as it examines “certain regulatory and other inquiries and investigations that are pending with respect to the company.”

The filing adds that Silvergate’s accountant “is also requesting detailed information relating to such matters and the company is responding to such requests.”

The delay comes as regulators increase their pressure on the cryptocurrency industry, and follows warnings from legislators that Silvergate’s ties to the crypto world could be putting the traditional banking industry at risk.

The filing references “investigations from our banking regulators, congressional inquiries and investigations from the U.S. Department of Justice.”

The outcome of these events could impact Silvergate’s ability to “continue as a going concern for the twelve months following the issuance of its financial statements,” the filing said.

As PYMNTS wrote last month, Silvergate “modeled itself as one of the leading go-to banks for crypto companies and emerged early on as a key provider of services catering to the industry.”

The bank built industry-specific systems that allowed for real-time fiat currency transactions between cryptocurrency depositors, including FTX founder Sam Bankman-Fried’s enterprise group of crypto operations.

That meant that Silvergate was among the hardest hit traditional lenders when FTX and its affiliated firm Alameda Research collapsed last November. The bank reported a $1 billion loss in the closing quarter of 2022 and cut 40% of its staff.

The company’s filing confirms reports from last month that the Justice Department was examining Silvergate’s hosting of accounts for FTX and Alameda, though the bank has not been accused of any wrongdoing. That investigation centers on what banks and intermediaries knew about the companies whose former executives have since been charged with fraud.

The bank has also faced questions from U.S. senators Elizabeth Warren (D-Mass.), John Kennedy (R-La.) and Roger Marshall (R-KS) about its relationship with FTX. Though the bank maintains it conducted due diligence in onboarding FTX and Alameda, the senators said in a letter to Silvergate that it wasn’t enough.

They also cited concerns about Silvergate’s use of the Federal Home Loan Bank (FHLB) program to boost its balance sheet.

“By using the FHLB as its functional ‘lender of last resort,’ Silvergate has further introduced crypto market risk into the traditional banking system,” the senators wrote. “If Silvergate were to fail — as have banks facing a fraction of the withdrawal rates Silvergate has faced — it could leave the FDIC — and therefore the American taxpayer — holding the bag.”