On June 1, The Board of Governors of the Federal Reserve System (Board of Governors) and the California Department of Financial Protection and Innovation (CA DFPI) announced a mutual consent order with Silvergate Capital Corporation, a former leader in crypto lending, providing for the winding down of its operations.
Under the terms of the consent order, the California-chartered bank is required to:
- Submit a self-liquidation plan providing for the orderly wind down of its operations within 10 days of the order;
- Maintain sufficient staffing during the self-liquidation process;
- Not declare or pay dividends, engage in share repurchases, or make any other capital distribution without the prior written approval of the Board of Governors;
- Preserve its cash assets and not dissipate those assets, including through executive compensation and severance payments, without prior written approval;
- Not acquire additional brokered deposits or engage in any expansionary activities;
- Take affirmative steps to preserve records and to suspend the destruction of paper documents, electronic documents and metadata under its control; and
- Continue to cooperation with the Board of Governors and the CA DFPI.
As discussed here, on March 8, Silvergate Capital announced it was winding down its operations. In the fourth quarter of 2022, Silvergate Capital’s crypto asset customers withdrew funds, causing total bank deposits to fall to $3.8 billion — a 68% deposit reduction. As a result, Silvergate Capital was forced to sell $5.2 billion in debt securities at a loss of $718 million, a sum greater than its total profits since 2013.