Crypto bank

Coinbase, Celsius and Paxos disclose funds in Signature Bank

The crypto-friendly Signature Bank was a key partner for many crypto firms, some which have been voluntarily disclosing their exposure to the recently closed firm.

Crypto exchange Coinbase, crypto lender Celsius and stablecoin issuer Paxos are among the crypto firms with funds reportedly tied up with the now-shuttered Signature Bank. 

The crypto-friendly Signature Bank was shut down by New York regulators on March 12 in conjunction with the United States Federal Deposit Insurance Corporation to “protect the U.S. economy,” as they claimed the bank posed a “systemic risk.”

Crypto exchange Coinbase tweeted on March 12 that it had around $240 million in corporate funds at Signature that it expected would be fully recovered.

Stablecoin issuer and crypto firm Paxos also came forward, tweeting it had $250 million held at the bank but added it held private insurance that covers the amount not covered by the standard FDIC insurance of $250,000 per depositor.

The Celsius Official Committee of Unsecured Creditors, a body that represents the interests of account holders at the bankrupt crypto lender Celsius, added that Signature Bank “held some of its funds” but did not disclose the amount.

It added that “all depositors will be made whole.”

As Signature Bank serviced so many firms in the crypto industry, those firms with no exposure equally came forward to quell fears about their related exposures.

Robbie Ferguson, co-founder of Web3 game development platform Immutable X, and Mitch Liu, co-founder of the media-focused Theta Network blockchain, separately tweeted that both of their respective companies had no exposure to Signature.

Related: Biden vows to hold those responsible for SVB, Signature collapse

Crypto exchange Crypto.com also reported in a March 12 tweet by CEO Kris Marszalek that it had no funds in the bank

The chief technology officer of stablecoin firm Tether, Paolo Ardoino, similarly tweeted Tether’s non-exposure to Signature Bank.

The announcement of Signature Bank’s forced closure aligned with other banking-related announcements by U.S. regulators.

The Federal Reserve said the FDIC was approved to take actions to protect depositors at Silicon Valley Bank, a tech-startup-focused bank that experienced liquidity issues due to a bank run that spread contagion to the crypto sector.

The Fed also announced a $25 billion program to ensure ample liquidity for banks to cover the needs of their customers during times of turbulence.

White House ‘aware of the situation’ at Silvergate, says spokeswoman

The spokeswoman said that she wouldn’t be commenting specifically on Silvergate, but the White House will be actively monitoring the situation with the crypto bank.

The Biden Administration is “aware of the situation” at Silvergate and will continue to monitor reports on the troubled bank as it unfolds, according to a White House spokesperson.

Speaking at a press briefing on March 6, Press Secretary Karine Jean-Pierre said the White House hasnoted that Silvergate marked another major crypto firm to “experience significant issues” in recent months but declined to go into further specifics on the firm.

“In recent weeks, banking regulators have released guidelines on how banks should protect themselves from risks associated with crypto,” she said, adding that:

“This is a president that has repeatedly called on Congress to take action to protect everyday Americans from the risk posed by digital assets and he will continue to do so. We won’t speak to this particular company as we have not with other cryptocurrency companies, but we will continue to monitor the reports.”

Silvergate, known as a “crypto bank,” was a key banking partner to a number of major crypto companies and projects.

However, uncertainty over the bank’s solvency began to spread at the start of March, after Silvergate delayed the filing of its annual 10-K report by two weeks. A 10-K report is a legally required document that provides a comprehensive overview of a company’s business and financial condition.

On the back of that news, Coinbase announced on March 2 that it had terminated its partnership with Silvergate, as the crypto exchange also alluded to concerns over the Department of Justice’s investigation into the firm over involvement in the collapse of FTX.

Several crypto heavyweights promptly followed suit by either cutting ties or distancing themselves from the bank, including Circle, Paxos, Bitstamp, Galaxy, MicroStrategy and Tether to name a few.

On March 4, Silvergate also announced that it was shutting down its digital asset payment network Silvergate Exchange Network due to “risk-based” concerns, sparking further uncertainty over the firm’s financials.

Related: Investor concerns persist as crypto investment products see 4th week of outflows

As a result, Silvergate’s stock price (SI) has plummeted roughly 60% since March 1, while the total combined market cap of crypto has dropped around 5.5% to $1.072 trillion in that same time frame.

Speaking with CNBC on March. 6, economist Noelle Acheson, the author of the Crypto is Macro Now newsletter, suggested that if Silverbank were to file for bankruptcy, it would give regulators a far greater excuse to clamp down on crypto than before, given the bank’s ties to traditional finance.

“Up until now we’ve been able to say that the fallout of everything that happened last year was contained within the crypto industry — painful, but contained,” Acheson said, adding that:

“If Silvergate goes under then the regulators will be able to say ‘aha, systemic risk, we told you so.’ That will give them even more ammunition to go after crypto and increase their choke on fiat access for crypto businesses.”

White House ‘aware’ of the Silvergate situation, says spokeswoman

The spokeswoman said that she wouldn’t be commenting specifically on Silvergate, but the White House will be actively monitoring the situation with the crypto bank.

The Biden Administration is “aware of the situation” at Silvergate and will continue to monitor reports on the troubled bank as it unfolds, according to a White House spokesperson.

Speaking at a press briefing on March 6, Press Secretary Karine Jean-Pierre said the White House hasnoted that Silvergate marked another major crypto firm to “experience significant issues” in recent months but declined to go into further specifics on the firm.

“In recent weeks, banking regulators have released guidelines on how banks should protect themselves from risks associated with crypto,” she said, adding that:

“This is a president that has repeatedly called on Congress to take action to protect everyday Americans from the risk posed by digital assets and he will continue to do so. We won’t speak to this particular company as we have not with other cryptocurrency companies, but we will continue to monitor the reports.”

Silvergate, known as a “crypto bank,” was a key banking partner to a number of major crypto companies and projects.

However, uncertainty over the bank’s solvency began to spread at the start of March, after Silvergate delayed the filing of its annual 10-K report by two weeks. A 10-K report is a legally required document that provides a comprehensive overview of a company’s business and financial condition.

On the back of that news, Coinbase announced on March 2 that it had terminated its partnership with Silvergate, as the crypto exchange also alluded to concerns over the Department of Justice’s investigation into the firm over involvement in the collapse of FTX.

Several crypto heavyweights promptly followed suit by either cutting ties or distancing themselves from the bank, including Circle, Paxos, Bitstamp, Galaxy, MicroStrategy and Tether to name a few.

On March 4, Silvergate also announced that it was shutting down its digital asset payment network Silvergate Exchange Network due to “risk-based” concerns, sparking further uncertainty over the firm’s financials.

Related: Investor concerns persist as crypto investment products see 4th week of outflows

As a result, Silvergate’s stock price (SI) has plummeted roughly 60% since March 1, while the total combined market cap of crypto has dropped around 5.5% to $1.072 trillion in that same time frame.

Speaking with CNBC on March. 6, economist Noelle Acheson, the author of the Crypto is Macro Now newsletter, suggested that if Silverbank were to file for bankruptcy, it would give regulators a far greater excuse to clamp down on crypto than before, given the bank’s ties to traditional finance.

“Up until now we’ve been able to say that the fallout of everything that happened last year was contained within the crypto industry — painful, but contained,” Acheson said, adding that:

“If Silvergate goes under then the regulators will be able to say ‘aha, systemic risk, we told you so.’ That will give them even more ammunition to go after crypto and increase their choke on fiat access for crypto businesses.”

MicroStrategy, Tether adds to firms distancing from Silvergate as stock dives 57%

MicroStrategy confirmed that none of its 130,000 BTC is custodied by Silvergate. However, the firm does have a loan to pay off to the bank by Q1 2025.

Business intelligence firm MicroStrategy, stablecoin issuer Tether have become the latest two firms to publicly deny any meaningful exposure to Silvergate Bank.

The news comes after Silvergate announced on March 1 that it would postpone the filing of its annual 10-K financial report, which has many fearing the cryptocurrency bank may be on the brink of a bankruptcy filing.

This led MicroStrategy — which holds over 130,000 Bitcoin (BTC) — to confirm that its BTC collateral is not custodied with Silvergate.

The Michael Saylor-founded firm added that it will not need to pay back a loan from Silvergate until Q1 2025 and that a bankruptcy or insolvency event wouldn’t “accelerate” the loan repayment.

Paolo Ardoino, the chief technology officer of Tether, confirmed in a March 2 tweet that Tether is not exposed to Silvergate either.

A collapse of the cryptocurrency bank could prove costly for the rest of the industry.

Silvergate is a fintech firm that provides financial infrastructure solutions and services to some of the largest cryptocurrency exchanges, institutional investors and mining companies in the world.

It offers a 24/7 payments platform, named Silvergate Exchange Network, which has reportedly processed over $1 trillion in transactions since 2017.

The firm also provides a stablecoin infrastructure platform, digital asset custody management and collateralized lending services to several institutional players in the cryptocurrency industry.

A diagram of Silvergate’s clientele and crypto offerings. Source: Silvergate Bank

Despite the large network effects, the late 10-K filing appears to have had a consequential effect on its partnerships.

Within 24 hours of the late 10-K filing, Coinbase, Circle, Bitstamp, Galaxy Digital and Paxos confirmed that they will scale back their partnerships with the cryptocurrency bank in some capacity.

Gemini also announced that it has stopped accepting customer deposits and processing withdrawals through Silvergate ACH and wire transfers.

Others who have seemingly cut or reduced ties include Crypto.com, Blockchain.com, Wintermute, GSR and Cboe Digital, according to reports. 

Meanwhile, a spokesperson from crypto exchange Binance confirmed to Cointelegraph that Binance has no partnership with Silvergate and does not use the crypto bank’s services.

Concerns of Silvergate’s potential financial troubles first surfaced in Q4 2022, when it reported a net loss of $1 billion as a result of the shock collapse of FTX in November.

Related: Coinbase no longer accepts payments via Silvergate Bank

The exact dealings between Silvergate and FTX have been subject to a probe by the United States Department of Justice recently, although there’s been no accusation of wrongdoing at this point.

Plaintiffs in a newly proposed class-action lawsuit against FTX on Feb. 14 accused Silvergate of “aiding and abetting” a “multibillion-dollar fraudulent scheme” that was orchestrated by former FTX CEO Sam Bankman-Fried.

Despite many firms recently claiming not to have exposure to Silvergate, the bank still processed over $3.8 billion in customer deposits in Q4 2022. This was a steep fall from $11.9 billion in Q3 2022, according to Silvergate.

Silvergate’s change in share price index on the New York Stock Exchange. Source: MarketWatch.

Since the news of the late 10-K filing on March 1, Silvergate’s stock price has fallen a massive 58.7% to $5.57. The stock is now down over 97% since its all-time high of $219.7, hit on Nov. 14, 2021.

Silvergate stock plunges 31% after delayed filing raises doubts over future

Crypto-friendly bank Silvergate has delayed filing its 10-K, an annual report on the financial health of the company. The news has sent its stock price down 31%.

Silvergate Bank has announced that it will delay the filing of its annual 10-K report, which has sent its stock price down over 30% after hours.

A 10-K report is a document required by the Securities and Exchange Commission that provides a comprehensive overview of a company’s business and financial condition. The crypto bank stated that it would need an additional two weeks to complete the report for the 2022 fiscal year.

Silvergate explained in its late filing notice that it sold additional debt securities in January and February and expects to record further losses in the coming months.

“These additional losses will negatively impact the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank (the “Bank”), and could result in the Company and the Bank being less than well-capitalized,” the firm stated in its late-notice filing.

“In addition, the Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements,” said Silvergate, adding: 

“The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.”

The crypto bank added that it’s in the process of conducting additional procedures and providing documentation, as requested by its independent registered public accounting firm, to complete a series of audits.

Silvergate explained that a number of factors could have an impact on the financial health of the firm in the near future.

Among those include the substantial market volatility experienced in Q4 2022, several high-profile bankruptcies in 2022 which has disrupted investor confidence in cryptocurrencies and stricter regulatory oversight on banks offering digital asset services.

The firm added that customer retention may be an issue, in addition to any potential liabilities or restrictions of the company that may be brought about by litigation.

Cointelegraph reached out to Silvergate for comment but did not receive a response at the time of publication.

Silvergate denies recent FUD, confirms minimal exposure to BlockFi

Silvergate Capital has been quick to distance itself from the now-bankrupt crypto lender BlockFi.

Institutional crypto services provider Silvergate Capital has confirmed its minimal exposure to the embattled BlockFi crypto lending firm.

On Nov. 28, Silvergate announced that its deposit relationship with BlockFi is “limited to less than $20 million of its total deposits from all digital asset customers.” Those deposits totaled $13.2 billion in Q3 according to the firm’s revenue report.

It added that BlockFi was not a custodian for its Bitcoin (BTC) collateralized leverage loans and the firm has no investments in BlockFi.

To quell investor jitters, Silvergate CEO Alan Lane said, “as the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility.”

Silvergate has been the subject of a lot of FUD (fear, uncertainty, and doubt), or “false and misleading statements,” in its words.

On Nov. 29, technical analyst and Swiss investor Walter Bloomberg told his 622 thousand Twitter followers, “Silvergate Capital said to have lent money to BlockFi,” but failed to provide any evidence.

Others have added to the FUD fest with several tweets over the past week. However, most of them were lacking specifics.

On Nov. 28, Cointelegraph reported that BlockFi had become the latest victim of the FTX contagion to file for Chapter 11 bankruptcy.

The filing stated that BlockFi has more than 100,000 creditors, assets between $1 billion and $10 billion, and similar liabilities. The latest high-profile crypto bankruptcy appears to have fuelled this recent round of FUD, which Silvergate has seen fit to refute.

Related: Silvergate Capital’s crypto-to-fiat transfers decrease by $50B compared with Q3 2021

Earlier this month, the WSJ ran an article on Silvergate, claiming that the company was battling the contagion fears. The crypto bank has seen its stock prices plunge this year but that has been the case for most publically listed crypto companies.

SI prices declined 11.1% on the day to finish at $24.45 in after-hours trading, according to Market Watch. Silvergate stock has slumped 83.6% since the beginning of the year.

On Nov. 23, Cointelegraph reported that Block.one CEO, Brendan Blumer, had purchased a stake in Silvergate Capital.

German crypto bank Nuri tells 500K users to withdraw funds ahead of shutdown

Nuri will maintain crypto trading services until the end of November, and has encouraged users to withdraw their assets before the mid-December deadline.

German crypto bank Nuri has told its 500,000 users to withdraw funds from their accounts as the firm prepares to shut down and liquidate the business, marking it as another victim of the 2022 bear market.

Nuri first reported liquidity issues in August, after announcing that it had filed for insolvency amid the economic strains of crypto winter. It said at the time that business would continue as usual, as it worked on a restructuring plan and securing a buyout. However, an acquisition has failed to materialize.

In an Oct. 18 blog post, Nuri CEO Kristina Mayer noted that despite the company’s best efforts, it is unable to maintain its operations moving forward.

Unlike bankrupt crypto lender Celsius, which locked user withdrawals before everything went south, Nuri is encouraging users to withdraw all of their assets before the Dec. 18 deadline.

“Customers have access and will be able to withdraw all funds until the aforementioned date. All assets in your Nuri account are safe and unaffected by Nuri’s insolvency. Trading will be possible until 30/11/2022,” the post reads.

Mayer explained that “this year, the challenges have become insuperable due to the tough economical and political environment of the past months, which kept us from raising new funds or finding an acquirer,” and added:

“On top, the insolvency of one of our main business partners worsened the situation significantly and put us over the edge. As a result, Nuri had to file for temporary insolvency in August this year.”

While Mayer didn’t specifically name its insolvent business partner, Celsius appears to be the prime candidate as it had partnered with Nuri to offer Bitcoin (BTC) interest accounts to its customers. These accounts were halted when Celsius went towards bankruptcy.

Mayer also noted that the company is still bullish on the potential of blockchain-based financial services.

Related: Texas authorities object to Voyager’s disclosure statement in its current form

“We still believe in innovative financial technology and are convinced that blockchain, cryptocurrency and decentralized finance will offer opportunities that add true value to the lives of people. Still, financial innovation should be safe, understandable and easy to use for as many people as possible,” Mayer wrote.