Silvergate collapses after delaying annual report, warning of viability

March 1 (Reuters) – Cryptocurrency lender Silvergate Capital warned it was delaying its annual report and said on Wednesday it was assessing its ability to operate as a going concern, sending its shares tumbling from more than a quarter in after-hours trading.

Silvergate posted a $1 billion loss in the fourth quarter as investors rushed to withdraw their deposits following the bankruptcy of crypto exchange FTX, and the company’s problems highlight the fragility of trust in digital assets.

The company said it would not be able to meet the extended March 16 deadline for submitting its annual report. He also said in a filing with the Securities and Exchange Commission that he had sold additional debt securities to pay off debt this year and that further losses mean the bank may be “less than well capitalized”. .

Silvergate is “evaluating the impact these subsequent events have on its ability to continue as a business,” he said. “The company is currently reassessing its business and strategies in light of the business and regulatory challenges it currently faces.”

Shares fell nearly 32% to $9.24 in after-hours trading, suggesting the stock could open Thursday at its lowest level in three years.

Silvergate’s stock is down around 96% from its record close in November 2021.

Federal prosecutors in Washington are investigating La Jolla, Calif.-based Silvergate and its dealings with FTX and trading company Alameda Research. In January, three US senators asked Silvergate for details about its risk management and FTX.

Wayne Huang, co-founder and CEO of XREX, a global crypto-USD exchange headquartered in Taipei, said the issues highlight just how interconnected and vulnerable the crypto bank has become.

“It accentuates the importance of having a strong banking network for crypto businesses, instead of over-reliance on just a few banks,” he said. Broader digital asset markets were relatively calm, although bitcoin gained little despite a decline in the US dollar, last buying at $23,457.

“From what we gather, most crypto companies have already had to find banking elsewhere, so we think the damage is likely already done in terms of implications for the broader crypto market,” said Matthew Dibb, chief investment officer at cryptocurrency asset manager Astronaut Capital. .

Global cryptocurrency exchange Binance had covert access to an account at Silvergate belonging to its supposedly independent US partner and transferred large sums of money from the account to a trading company run by Binance CEO Changpeng Zhao, said reported Reuters last month.

Reporting by Noel Randewich; Additional reporting by Rae Wee and Tom Westbrook in Singapore. Edition by Lincoln Feast.

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