Business intelligence firm MicroStrategy and stablecoin issuer Tether have become the latest two companies to publicly deny having any significant exposure to Silvergate Bank.
The news comes after Silvergate announced on March 1 that it would delay filing its annual 10-K financial report, with many concerned that the cryptocurrency bank could be on the verge of filing for bankruptcy.
This led to MicroStrategy - holding over 130,000 Bitcoins - Verify that their BTC collateral is not hosted by Silvergate.
The company, founded by Michael Saylor, added that it would not need to repay the Silvergate loan until the first quarter of 2025 and that repayments would not be "accelerated" by an event of bankruptcy or insolvency. Tether was also not exposed to Silvergate, Tether’s CTO Paolo Ardoino confirmed in a March 2 tweet. The collapse of a cryptocurrency bank could prove costly for the rest of the industry.
Silvergate is a fintech company providing financial infrastructure solutions and services to some of the world's largest cryptocurrency exchanges, institutional investors and mining companies.
It offers a 24/7 payments platform called the Silvergate Exchange Network, which has reportedly processed more than $1 trillion in transactions since 2017.
The company also provides stablecoin infrastructure platforms, digital asset custody management and mortgage lending services to several institutional players in the cryptocurrency industry. Despite the massive network effects, the late filing of the 10-K appears to have had a commensurate impact on its partnerships.
Within 24 hours of filing the 10-K, Coinbase, Circle, Bitstamp, Galaxy Digital and Paxos confirmed that they would scale back their partnerships with cryptocurrency banks in some capacity.
Gemini also announced that it has stopped accepting customer deposits and processing withdrawals via Silvergate ACH and wire transfers.
Other companies that appear to have severed or reduced ties reportedly include Crypto.com, Blockchain.com, Wintermute, GSR, and Cboe Digital.
Meanwhile, a spokesperson for cryptocurrency exchange Binance confirmed to Cointelegraph that Binance does not have a partnership with Silvergate and does not use the crypto bank’s services. Concerns about Silvergate's potential financial troubles first surfaced in the fourth quarter of 2022, when the company reported a net loss of $1 billion due to the November FTX crash. The exact dealings between Silvergate and FTX were recently investigated by the U.S. Department of Justice, although there have been no allegations of wrongdoing so far.
In a new proposed class action against FTX on Feb. 14, the plaintiffs accused Silvergate of "aiding and abetting" a "digital scam" orchestrated by former FTX CEO Sam Bankman-Fried. Billion Dollar Fraudulent Scheme".
The bank processed more than $3.8 billion in customer deposits in the fourth quarter of 2022, despite a number of firms recently claiming they hadn't approached Silvergate. That's down sharply from $11.9 billion in the third quarter of 2022, according to Silvergate. Since news of the 10-K filing broke on the evening of March 1, Silvergate's shares have fallen 58.7 percent to $5.57. The stock is now down more than 97% since hitting an all-time high of $219.7 on Nov. 14, 2021.
