U

U.S. FED Orders Collapsed Silvergate Bank To Wind Down

Cryptop bank Silvergate closes down
Spread financial intelligence

Silvergate Bank is currently under scrutiny by the U.S. Federal Reserve Board (FED) and the California Department of Financial Protection and Innovation as it undergoes the process of winding down its business operations. In a collaborative enforcement action, the Fed and DFPI jointly issued a consent order last week, which mandates the La Jolla, California-based bank to present a self-liquidation plan to state and federal regulators within 10 days.

The consent order also prohibits the bank from destroying any records. It emphasizes the requirement for bank officials to fully cooperate with an ongoing investigation pertaining to Silvergate‘s association with the defunct cryptocurrency exchange FTX.

Despite Silvergate’s voluntary announcement of its liquidation plans, with intentions to fully repay all deposits, a notice from the FED highlighted the discovery of multiple deficiencies during examinations conducted at the bank subsequent to the collapse of the crypto exchange FTX in November 2022. The Federal Reserve reported that Silvergate encountered significant declines in deposits from its customers engaged in crypto assets during the fourth quarter of 2022, leading to notable funding and liquidity challenges.

Given the circumstances, any self-liquidation plan put forth by Silvergate will prioritize safeguarding the funds of depositors. The FED officials and California’s Department of Financial Protection and Innovation will closely monitor and grant approval to any plan presented by Silvergate. Additionally, the regulators have imposed restrictions on Silvergate’s leadership, preventing them from receiving “golden parachute payments” or making changes to their responsibilities throughout the process of winding down the bank’s operations.

Leave a Reply

Your email address will not be published. Required fields are marked *