Introduction:

The Silvergate Bank has spent its last days under siege. Bombarded by short sellers, abandoned by customers, and avoided by business partners, the executives of the crypto-focused bank faced regulators from the United States at their headquarters in California.

Employees from the Federal Deposit Insurance Corporation (FDIC), the agency that guarantees deposits of financial institutions, arrived at the company's offices with the intention of preventing the first casualty of a US banking institution due to the implosion of the cryptocurrency market.

Among the options they discussed was finding crypto investors to help increase liquidity amid the bank's growing losses. However, a desperate round of phone calls to potential investors failed, and no company is willing to bear the burden of associating with a business so deeply mired in the turbulence of the sector.

What's more?

The Silvergate Bank has spent its last days under siege. Bombarded by short sellers, abandoned by customers, and avoided by business partners, the executives of the crypto-focused bank faced regulators from the United States at their headquarters in California.

Employees from the Federal Deposit Insurance Corporation (FDIC), the agency that guarantees deposits of financial institutions, arrived at the company's offices with the intention of preventing the first casualty of a US banking institution due to the implosion of the cryptocurrency market.

Among the options they discussed was finding crypto investors to help increase liquidity amid the bank's growing losses.

However, a desperate round of phone calls to potential investors failed, and no company is willing to bear the burden of associating with a business so deeply mired in the turbulence of the sector.

With survival seeming increasingly unlikely and no buyer in sight, Silvergate announced on Wednesday (8) that it was closing its doors, ending a decade in which it became a central player as the crypto sector grew.

On Thursday afternoon (9), Silvergate's shares in New York were down 25% at $3.61, recovering some of the losses recorded in pre-market trading, when the stock fell below $3.

However, the damage is still enormous: from the $219 hit in November 2021, the decline is over 98%.

The decision to voluntarily close and liquidate the business, described by people familiar with the matter who spoke on condition of anonymity, stemmed months of turmoil at the bank resulting from its ties to Sam Bankman-Fried's FTX exchange.

The collapse of the cryptocurrency brokerage in November, followed by allegations of fraud, shone a spotlight on Silvergate and, simultaneously, initiated regulatory crackdowns on crypto ties to the banking sector.

 What's happening now?

As the pressure mounted, with short sellers bombarding, clients abandoning, and business partners avoiding the bank, executives of Silvergate Bank, focused on crypto, faced regulators in their California headquarters in the United States.

Officials from the Federal Deposit Insurance Corporation (FDIC), the agency that guarantees deposits of financial institutions, arrived at the company's offices with the intention of preventing the first casualty of a US banking institution due to the implosion of the cryptocurrency market.

Among the options they discussed was finding crypto investors to help boost liquidity amid the bank's mounting losses. However, a desperate round of phone calls to potential investors failed, and no company is willing to bear the burden of associating with a business so deeply mired in sector turbulence.

With survival looking increasingly unlikely and no buyer in sight, Silvergate said on Wednesday (8) that it was closing its doors, ending a decade in which it became a central player as the crypto sector grew.

On Thursday afternoon (9), Silvergate's shares in New York were down 25% at $3.61, recovering some of the losses recorded in pre-market trading, when the stock was worth less than $3. However, the damage is still enormous: from the $219 hit in November 2021, the decline is over 98%.

The decision to voluntarily close and liquidate the business, described by people familiar with the matter who spoke on condition of anonymity, stemmed months of turbulence at the bank due to its ties to Sam Bankman-Fried's FTX exchange.

As Silvergate buckled under pressure, recording $1 billion in losses in the fourth quarter and bleeding more capital this year, it was forced to postpone its annual report and raised questions about whether it could remain in business.

After tying itself so tightly to the new world of crypto assets, the bank exposed itself to an old-world banking risk: when the sector's prospects worsened, Silvergate had few other businesses to fall back on.

"Silvergate's problems are as much, if not more, about traditional banking risks - lack of diversification, maturity mismatches - as they are about their exposure to crypto," said Sheila Bair, who headed the FDIC during the last global financial crisis.

A Silvergate representative was sought but declined to comment.