Embattled crypto-focused bank Silvergate Capital went belly up on Wednesday following months-long flight of capital and erosion of deposit base in the aftermath of the FTX collapse at the end of 2022.
The California-based bank said it was winding down operations and liquidating the assets, triggering a fresh stock sell-off that saw more than 40 percent plunge in the after hours.
Voluntary Liquidation
"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 regulatory filing.
"The Bank's wind down and liquidation plan includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets," it added.
Silvergate Capital had run into problems after it delayed filing its annual report in early March. Silvergate has been struggling to stay afloat after Sam Bankman-Fried's crypto exchange FTX collapsed in November last year, triggering panic across the crypto segment.
Impact of FTX Collapse
In the aftermath of the FTX collapse, panicked crypto investors withdrew more than $8 billion in deposits from the bank. Silvergate's total deposits from digital asset customers went from $11.9 billion to $3.8 billion in the months after the FTX collapse.
Following Silvergate's announcement, shares plummeted more than 42 percent.
Meanwhile, Yahoo Finance reported that California's Department of Financial Protection and ISilvergate capitalnnovation is stepping into protect investor wealth. The Department is monitoring the situation according, its commissioner Clothilde Hewlett said in a statement.
"The Department is evaluating compliance with all financial laws, as well as safety and soundness obligations, and is working closely with relevant Federal counterparts," Hewlett said.
