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Silvergate Ordered to Submit Liquidation Plan Within 10 Days

AA News - Jordan Lyanchev 2023-06-02 19:15

One of two crypto-friendly banks that provided much-needed liquidity for the industry – both of which went bankrupt earlier this year – Silvergate Bank, has been ordered to present a concrete plan for the voluntary liquidation they agreed to within the next ten days.

Liquidation to Happen ASAP

Silvergate first announced plans for voluntary liquidation on the 8th of March. Supervised by financial advisor Centerview Partners LLC, as well as law firm Cravath, Swaine & Moore LLP, the Federal Reserve emitted a consent order – an unappealable settlement agreement – enforcing the promised liquidation.

The announcement was made by the U.S. Federal Reserve on the 1st of June and gives Silvergate Capital Corporation and its subsidiary Silvergate Bank 10 days to present the court with a detailed liquidation plan.

@federalreserve announces consent order against Silvergate Capital Corporation and Silvergate Bank to facilitate the voluntary self-liquidation that Silvergate announced on March 8, 2023:

— Federal Reserve (@federalreserve) June 1, 2023

Silvergate to Prioritize Depositor Funds

Although Silvergate vowed to provide “a full repayment of all deposits” ever since they announced their plans for liquidation, investigations by the U.S. government and its regulatory bodies have discovered plenty of issues at the bank – most of which allegedly worsened after the collapse of FTX. As one of the largest business partners of Silvergate, the sudden collapse of the former crypto empire purportedly left Silvergate in a liquidity crisis.

To prevent the improper use of remaining liquidity, the court has imposed limits on the use of funds to prevent executives with “golden parachutes,” generous severance packages that would allow them to walk away from their failure unscathed.

“The Federal Reserve’s order ensures Silvergate will implement its previously announced plan for winding down the bank’s operations in a manner that protects the bank’s depositors and the Deposit Insurance Fund. Silvergate is also prohibited from making capital distributions, dissipating cash assets, and engaging in certain other activities without regulatory approval.”

The Federal Reserve’s order will be enforced in partnership with the Department of Financial Protection and Innovation of the State of California (DFPI), the state chartering authority, and the appointed private supervisors listed above.

With Silvergate, Signature, and Silicon Valley Bank all out of the picture, the crypto industry at large is looking for alternative banks that can provide fiat reserves for all operations. Unfortunately, the collapse of FTX and other crypto platforms has soured the banking industries’ view of cryptocurrencies, a stance worsened by the current allegedly wild west-style regulatory enforcement carried out by the SEC and other regulators.

The post Silvergate Ordered to Submit Liquidation Plan Within 10 Days appeared first on CryptoPotato.