Silvergate losses reveal operational concerns for crypto bank

Silvergate Capital, look at that closing off. 57% shares taking a nosedive after the company delayed. It's quarterly released. David Hollerith is here with the latest. And David, lots of questions just about that path forward here for Silvergate Capital at this point. Sure. Yeah.

So Silvergate released preliminary results for Q4 in January, saying that it suffered nearly a billion dollars in losses over the fourth quarter. But it still had to release the final annual report. It's 10Q. And last night, it issued a notice saying yesterday it wasn't going to be able to make an extension time to file that 10Q. So this is actually Harkins back to sort of signals that have come up in the financial crisis, which is typically when a company can't turn in their 10Q on time, it's a bad sign. And the company went as far as to express general concern over its own ability to operate going forward. Now as part of sort of what it has reported, it said that its losses are going to be worse than what it said they were going to be in January.

And part of that is due to the fact that they had to sell debt securities to pay off for loans they borrowed from the Federal Home Loan Bank. It's also been investigated by, or under investigation by a number of regulatory agencies. It has alluded to in the notice. And Silvergate hasn't been accused of any wrongdoing at this time, but there's a lot of concern about whether or not it can operate going forward, especially when it's coming from the company itself. And the company has not added any more comment other than to say that it's working diligently to turn in the 10Q. All right, as with any of these stories, David, we're wondering about collateral damage. How does this impact other crypto companies? Yeah, that's a good question.

I mean, generally, when you think about a bank, especially one that caters to crypto exchanges, for market makers and for exchanges, there's going to be less liquidity available, less quickly. But that being said, several crypto firms have quickly come out to distance themselves from Silvergate, including Coinbase, Paxos, Galaxy Digital, UK Headquarter Exchange, Bitstamp, Gemini, Crypto.com, and Circle. And none have confessed to have material exposure to Silvergate, meaning that this is somewhat of an isolated situation, at least as of now from what these companies are saying. They've all said that they've made this decision out of an abundance of caution. So, the Bitcoin-Borrow strategy, which is also the largest corporate holder of Bitcoin on its balance sheet, said that it did borrow loans from Silvergate, which are due in 2025. And those loans will not be accelerated, even if Silvergate goes insolvent.

So for now, for the time being, from the people we have heard from, it sounds like it's relatively isolated. And that being said, Binance US and Kraken have both decided not to comment on Silvergate.

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