Sept 18 (Reuters) - Silvergate Capital ( SICP ), the parent

company of crypto-focused Silvergate Bank, has filed for

bankruptcy to wind down its operations after the bank's 2023

shutdown.

The company, which has no remaining lines of business, filed

for bankruptcy late Tuesday in Wilmington, Delaware, to complete

the bank's liquidation and pay creditors using its remaining

cash.

La Jolla, California-based Silvergate, which primarily

served clients in the cryptocurrency industry, ceased operations

in March 2023 and returned deposits to customers after turmoil

in the broader digital asset market caused a run on the bank.

After repaying customer deposits, Silvergate Capital ( SICP ) has

about $163 million in cash that it will divide among its

stakeholders in bankruptcy. Silvergate expects to fully repay

bondholders who are owed $18 million and make payments to

holders of preferred equity, but it does not expect to be able

to repay holders of its common stock.

Silvergate was one of several U.S. banks to collapse in

2023, including Silicon Valley Bank, First Republic Bank and

Signature Bank.

Silvergate had expanded rapidly as crypto markets took off,

with the bank's total deposits growing from $1.8 billion at the

end of 2019 to $14.3 billion at the end of 2021. Digital asset

exchange customers accounted for approximately 58% of Silvergate

Bank's overall deposits in 2021, according to court filings.

After a spate of crypto companies failed in 2022, including

the once-prominent crypto exchange FTX, customers withdrew more

than $8 billion from Silvergate. The withdrawals forced the bank

to sell long-term debt securities at a loss, according to court

filings.

Silvergate Capital ( SICP ) said that U.S. regulatory scrutiny in the

wake of the 2022 crypto collapse made Silvergate Bank's business

model "untenable."

Silvergate agreed in 2023 to pay $63 million to end probes

by the Federal Reserve, California's bank regulator, and the

U.S. Securities and Exchange Commission. Bank regulators said

they found deficiencies in Silvergate's monitoring of

transactions in compliance with anti-money laundering laws,

while the SEC said the bank and three of its top executives made

misleading statements.

Silvergate said in bankruptcy court filings that its bank

"did not fail," and that it repaid all customer deposits without

any cost imposed on the U.S. Federal Deposit Insurance

Corporation.

The case is In Re: Silvergate Capital Corp ( SICP ), U.S. Bankruptcy

Court for the District of Delaware, No. 24-12158

For Silvergate Capital ( SICP ): Paul Heath, Emily Mathews, Michael

Merchant and David Queroli of Richards, Layton & Finger

Read more:

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