Federal Reserve ends enforcement action against Silvergate Bank after successful liquidation

The Federal Reserve Board said the termination of an enforcement enactment against Silvergate Bank and its holding company, Silvergate Capital Corporation, according to a July 26 press release.

The action, effectual since May 2023, required the slope to liquidate and upwind down its operations successful a mode that protected its depositors.

The Fed’s determination comes aft Silvergate successfully completed its liquidation and wind-down plan, having paid backmost each deposits to its customers and ceased its operations arsenic a bank. This marks a important closure for the bank, which has faced sizeable challenges since its illness successful March 2023.

Silvergate collapse

Silvergate Bank, erstwhile known for its beardown ties to the crypto industry, notably faced a terrible downfall pursuing the implosion of FTX successful precocious 2022.

The bank’s illness was preceded by important fiscal distress, including its banal becoming the second-most shorted connected Wall Street by February 2023 — with 72% of its shares borrowed for abbreviated positions.

In aboriginal March 2023, Silvergate delayed the merchandise of its 10-K form, a captious yearly filing that provides insights into a company’s fiscal health. This hold triggered a crisp 31% driblet successful its banal value.

On March 8, 2023, the slope announced its collapse, attributing it to the fallout from the FTX debacle and the consequent withdrawal unit of large clients’ funds.

Federal oversight

Following the collapse, the Federal Reserve Board supervised Silvergate’s self-liquidation program to guarantee the maximization of lawsuit reimbursements. Despite the oversight, the slope faced galore lawsuits from dissatisfied parties who challenged the liquidation plan.

In August 2023, amid the liquidation process and escalating ineligible troubles, Silvergate’s CEO Alan Lane and different apical executives resigned from their positions. Despite the termination of the enforcement action, Silvergate continues to grapple with ineligible issues.

A national justice allowed a class-action suit to proceed against the steadfast successful March, alleging that Silvergate facilitated the fraud perpetrated by FTX. Meanwhile, the SEC filed its ain lawsuit against Silvergate Capital Corporation successful May, accusing it of complicity successful the FTX fraud, which the steadfast settled for $50 cardinal successful June.

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