Embattled crypto-friendly bank Silvergate is working with regulators to prevent a complete shutdown of operations.
According to a Tuesday report from Bloomberg, examiners from the Federal Deposit Insurance Corporation (FDIC) were sent to Silvergate’s headquarters in California last week.
The FDIC officials were authorized to go to Silvergate’s offices by the Federal Reserve, and are currently reviewing the bank’s books and records.
News of Silvergate’s perilous financial situation was made public last week, when the firm disclosed an ongoing investigation by the U.S. Department of Justice (DOJ), sending its stock price down nearly 60% in a single day. Unsurprisingly, what followed was an exodus of the bank’s top clients, which included major crypto firms like Coinbase, Kraken, Gemini and Circle.
The firm also suspended its Silvergate Exchange Network (SEN) – a 24/7 crypto payments network widely used by institutional clients.
Silvergate had $6.3 billion worth of deposits as of Dec. 31, marking a considerable decline since the $13.2 billion it reported in September.
— Marc Cohodes (@AlderLaneEggs) March 7, 2023
According to hedge fund investor Mark Cohodes, the FDIC’s involvement doesn’t necessarily mean good news. (Cohodes and Lumida CEO Ram Ahluwalia discussedhow FTX’s implosion could impact Silvergate in an episode of Unchained in January).
Although its future looks bleak in the eyes of many industry watchers, the bank is still exploring options to stay afloat.
Seeing as Silvergate’s deposits are insured by the FDIC, the regulator could play a significant part in these efforts. According to people familiar with the matter, one possible solution involves lining up crypto-industry investors to bolster its liquidity. The bank is yet to make a decision on how best to deal with its ongoing financial predicament.