Major Announcement: Silvergate Bids Adieu to SEN
In a noteworthy shift that has the crypto community buzzing, Silvergate Bank declared on March 3 that it is shutting down the Silvergate Exchange Network (SEN). This “risk-based decision” is as shocking as running out of coffee on a Monday morning. Amid plunging stock prices, down over 59% in just five days, the bank aimed to mitigate further risks;
What’s That? A Disclaimer?
Don’t you just love a good disclaimer? Silvergate took to its website to calm the waters, stating, “Effective immediately, Silvergate Bank has made a risk-based decision to discontinue SEN. All other deposit-related services remain operational.” Hey, at least you can still keep your piggy bank, right?
BlockFi’s $9.8 Million Odyssey
As if the day couldn’t get any crazier, Judge Michael Kaplan ruled that Silvergate must return a whopping $9.8 million to BlockFi. According to documents from BlockFi’s restructuring advisor, this ruling comes as a part of a prior agreement between the firms in November 2022. Imagine being on a rollercoaster that you didn’t ask to ride—this is the crypto world.
The Ripple Effect of FTX
The winds of change blowing through Silvergate are inevitably tied to the aftermath of the FTX collapse. Silvergate faced liquidity problems partway through a bear market, resulting in a significant $1 billion net loss. It’s like trying to stay afloat during a mini-tsunami, and no one likes wet socks.
Borrowing Trouble: A $3.6 Billion Lifeline
To keep its head above water, Silvergate borrowed $3.6 billion from the U.S. Federal Home Loan Banks System. Think of it as borrowing sugar from your neighbor but on a much grander scale. In a nutshell, the bank had to scramble to secure cash liquidity, often through wholesale funding and selling debt securities.
Legal Troubles Brewing
Legal issues? Yep, they’re on the menu too! The bank is facing class-action lawsuits tied to its relationship with FTX and Alameda Research. It’s like watching your favorite show and finding out it’s been canceled—except this is real life and the stakes are just a tad higher.
Withdrawal Waves: Partnerships Take a Hit
Within hours of the news hitting the wires, major crypto firms like Coinbase, Circle, and Bitstamp began reassessing their partnerships with Silvergate. MicroStrategy and Tether even hopscotched away, publicly denying they had any real exposure to the banking fiasco. Talk about a quick exit!
The Short Squeeze Dilemma
Silvergate’s stock was hot on the short-selling circuit, being the second-most-shortened stock in the U.S. in February with a staggering 72.5% of its shares under the microscope. The lessons here? Don’t play with fire unless you’ve got a fire extinguisher.
What’s Next? The Uncertain Horizon
As of now, Silvergate’s fate hangs in the balance, with many wondering if it can weather this storm. One thing’s for sure: the crypto world thrives on adrenaline, so grab your popcorn and watch the drama unfold!
