Shares of several cryptocurrency-related companies are mixed after reports regarding the crypto bank.
Other crypto-related companies were mixed.
Silvergate’s woes are also spilling over into the cryptocurrency market, which is down 3.1% in the past 24 hours to $1.08 trillion, according to data from CoinGecko.
Bitcoin was down 4.2% at $22,354, while ether was down 3.7% at $1,567.
Crypto Customers Suspend Certain Transfers
Silvergate’s stock market drop stems from news that many of its crypto customers stopped allowing payments to or from the company.
Crypto companies such as Coinbase, Circle, Paxos, Crypto.com, Bitstamp, Cboe Digital Markets, Galaxy Digital and Gemini all said on March 2 that they would suspend automated clearing house, or ACH, transfers and other business operations with the bank. LedgerX, a crypto derivatives provider, was the first to cut ties with Silvergate.
Based in San Diego, Silvergate said on March 2 that it would delay filing its annual 10-K report to the Securities and Exchange Commission, which sent the shares down nearly 58%.
In a filing, Silvergate said it needed more time for its accounting firm to finish audit procedures while the bank is “currently analyzing certain regulatory and other inquiries and investigations.”
Coinbase said its exposure to Silvergate was minimal.
“In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate,” the company said. “Coinbase has de minimis corporate exposure to Silvergate.”
Silvergate’s future is in question, less than four months after cryptocurrency exchange FTX and its sister company, Alameda Research, both founded by Sam Bankman-Fried, filed for bankruptcy.
The majority of Silvergate’s customers are crypto firms that face challenges conducting business with traditional banks. They were customers until March 1, when Silvergate said in a regulatory filing that its survival was now at stake.
The most critical aspect currently is that the bank says, without providing further details, that it has to analyze new events linked to investigations by regulators.
The results for fourth-quarter 2022 and those for the full-year 2022, announced on Jan. 17, will have to change, Silvergate suggests. The figures announced to investors are not accurate and will have to be adjusted.
Binance Account Reportedly Held at Silvergate
Last month, Reuters reported that Binance, the world’s largest cryptocurrency exchange, had access to a bank account belonging to its American subsidiary, Binance.US. The bank account was held at Silvergate Bank.
Binance executives transferred hundreds of millions from this account to a trading platform, Merit Peak. The manager of Merit Peak was Changpeng Zhao, the founder of Binance and rival of Sam Bankman-Fried.
At the time, Binance.US executives were unaware of these money movements and learned about them after they were made, according to Reuters, which cited text messages between the CEO of Binance.US and a Binance executive.
Money transfers had started at the end of 2020. In the first three months of 2021, more than $400 million was transferred.
Binance.US dismissed the information, saying, in a tweet that “only Binance.US employees have access to Binance.US bank accounts. Period.”