How Silvergate, The Criptocurrency Bank changed history

Prior to its collapse earlier this week, Silvergate Capital SI was one of the main banks for the criptocurrency industry. The news came just a week after the firm delayed its annual report to the U.S. Securities and Exchange Commission. Shares of Silvergate Capital fell.

Here is an overview of the timeline of what happened with the firm, and its eventual showdown.

Silvergate Capital was a California-based community bank that launched in the late 1990s and moved intocryptocurrencies to offer traditional financial services to companies like FTX which filed for bankruptcy in November 2022. This was before any other banks were thinking about it, making Silvergate an essential part of the entire criptocurrency industry.

Silvergate operates the Silvergate Exchange NetworkSilvergate Exchange Network, an instant payment platform that allows Silvergate clients to send dollars to any Silvergate account, even when traditional banks are closed on nights and weekends.

Although the bank didn't deal with cryptocurrencies because withdrawals and deposits were done in fiat currencies, most of its clients dealt withcryptocurrencies, so it was hard hit when the market for cryptocurrencies slumped last year. One of the largest exchanges in the industry was FTX, before filing for Chapter 11 bankruptcy.

Silvergate Capital's stock price dropped a bit over a year since its record high in November 2021, around 95% of the stock price was still at a high in just a little over a year. In March of last year investors were excited about Silvergate's potential and the possibility of it issuing a stable coin after it bought assets from Meta s Diem, which was part of Meta Platform's effort to build a payments network.

Blackrock BLK and Citadel Securities announced earlier this year they had a stake in Silvergate, at 7% and 5.5% respectively.

Things changed quickly earlier this month after Silvergate warned that it was delaying its annual report to the U.S. SEC and evaluating its ability to operate. The bank had reported a $1 billion loss for its fourth quarter earlier this year, as investors withdrew deposits in the wake of the FTX bankruptcy, as it was once one of Silvergate's biggest customers. In January of this year, the firm had laid off 40% of its staff.

In January a group of U.S. senators sent a letter to the bank questioning its role in FTX's business practices. The letter criticized the bank for taking out a loan from the Federal Home Loan Bank of San Francisco FHLB, which could further introduce cripto market risk into the traditional banking system. The bank was facing a number of lawsuits accusing it of not alerting investors that it lacks the necessary protections needed to detect money laundering on the platform.

The stock price plunged more than 36% after-hours trading after the firm ended its operations and liquidating its bank.

In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward, the bank said in a statement. The Bank's wind down and liquidation plan includes full repayment of all deposits. The company didn't outline how it plans to resolve claims against its business.

The price ofBTCUSD and Ether ETHE took a hit as a result of the news, but also because of a number of other events that occurred this week.