The defunct crypto-focused Silvergate Bank is now free from legal charges from the Federal Reserve Bank. This new development comes as Silvergate Bank has paid all its customers’ deposits and ceased its banking businesses.
The End of Silvergate Bank
The Federal Reserve Board said it has concluded its enforcement actions against the organization. Before the regulatory measures started in May 2023, the financial institution struggled financially leading to a bank run.
This mishap saw it lay off 40% of its workforce, recorded a huge net loss and experienced a sharp decline in customer deposits. This caused the bank to sell a considerable amount of debt securities to cover the withdrawals.
The bank took the tough decision to wind-down operations and liquidate holdings after its stock price plummeted. The liquidation plan was overseen by the U.S. Board of Governors to ensure the strategy safeguards the bank’s depositors. This prompted the U.S. Board of Governors to step in and see through the liquidation process to safeguard the bank’s depositors.
Following that period, Silvergate Bank has now finalized its liquidation and wind-down strategy. It has refunded all deposits to its customers and has officially ceased its operations as a bank.Â
Notably, the crypto-friendly firm agreed to settle with US and California regulators over management issues and misleading investors. Also, it was charged a $43 million fine for Anti-Money Laundering (AML) compliance failure.Â
Silvergate Bank Run Rattles The Market
The unfortunate incident had a significant adverse impact on the crypto industry last year.
It led to a loss of confidence among investors and market participants, causing a decline in overall sentiments in the industry. In 2023, Coinbase and Galaxy Digital raced to sever ties with the bank after it warned of its uncertain business continuity. This was preceded by FTX’s collapse months earlier, causing significant asset losses.
The market sentiment remained subdued until Q4 2023 when institutional adoption picked up. Remarkably, the spot Bitcoin ETFs approval in January and recently approved Ethereum ETFs spurred institutional investments confidence once again.
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