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Federal Reserve ends enforcement action against Silvergate Bank after successful liquidation

Federal Reserve ends enforcement action against Silvergate Bank after successful liquidation
© Copyright Image: CryptoSlate

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

The action, effective since May 2023, required the bank to liquidate and wind down its operations in a manner that protected its depositors.

The Feds decision comes after Silvergate successfully completed its liquidation and wind-down plan, having paid back all deposits to its customers and ceased its operations as a bank. This marks a significant closure for the bank, which has faced considerable challenges since its collapse in March 2023.

Silvergate collapse

Silvergate Bank, once known for its strong ties to the crypto industry, notably faced a severe downfall following the implosion of FTX in late 2022.

The banks collapse was preceded by significant financial distress, including its stock becoming the second-most shorted on Wall Street by February 2023 with 72% of its shares borrowed for short positions.

In early March 2023, Silvergate delayed the release of its 10-K form, a critical annual filing that provides insights into a companys financial health. This delay triggered a sharp 31% drop in its stock value.

On March 8, 2023, the bank announced its collapse, attributing it to the fallout from the FTX debacle and the subsequent withdrawal pressure of major clients funds.

Federal oversight

Following the collapse, the Federal Reserve Board supervised Silvergates self-liquidation plan to ensure the maximization of customer reimbursements. Despite the oversight, the bank faced numerous lawsuits from dissatisfied parties who challenged the liquidation plan.

In August 2023, amid the liquidation process and escalating legal troubles, Silvergates CEO Alan Lane and other top executives resigned from their positions. Despite the termination of the enforcement action, Silvergate continues to grapple with legal issues.

A federal judge allowed a class-action lawsuit to proceed against the firm in March, alleging that Silvergate facilitated the fraud perpetrated by FTX. Meanwhile, the SEC filed its own lawsuit against Silvergate Capital Corporation in May, accusing it of complicity in the FTX fraud, which the firm settled for $50 million in June.

The post Federal Reserve ends enforcement action against Silvergate Bank after successful liquidation appeared first on CryptoSlate.

Read more: https://cryptoslate.com/federal-reserve-ends-enforcement-action-against-silvergate-bank-after-successful-liquidation/

Text source: CryptoSlate

Disclaimer: Financial information and news are not financial advice, read the disclaimer.
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