MicroStrategy Joins Tether and Coinbase in Divorcing Silvergate Capital as Stock Sinks
MicroStrategy ruled out speculations that a substantial portion of its bitcoin holdings were placed under custody of Silvergate Capital. The firm dismissed such claims by asserting that none of the 130000 BTC run in the Silvergate custody services. Nonetheless, the business intelligence firm admitted a loan whose repayment is scheduled for the first quarter of 2025.
MicroStrategy and Tether Dismisses Suffering Meaningful Exposure
The move by MicroStrategy mirrors the announcement conveyed by stablecoin issuer Tether to dismiss having meaningful exposure to the sinking Silvergate Capital publicly. The announcements by the firms come after the crypto banks revealed on March 1 its decision to delay filing the annual 10-K report.
The decision to delay the mandatory disclosure led many to fear the crypto bank is on the verge of seeking Chapter 11 bankruptcy protection.
The revelation of delayed Form-10 K filing compelled MicroStrategy to downplay speculators’ perspective that its BTC collateral was battling significant exposure within the Silvergate custody.
MicroStrategy Admits Loan, Rules out Rushed Payment
The firm founded by Michael Saylor ruled out the likelihood of rushed payment for the loan advanced by Silvergate Capital Corp until the first quarter of 2025. Also, the firm restated that the insolvency of Silvergate would not accelerate the repayment.
The chief technology executive at Tether, Paolo Ardoino, revealed in his March 2 tweet ruling out the USDC stablecoin issuer had exposure to the crypto bank. However, the crypto bank collapse would become calamitous for the entire industry.
Silvergate Capital Diversified Infrastructure Portrays Deep Ties in Crypto Industry
Silvergate Capital Corp is a fintech-based firm offering diversified financial infrastructure solutions to multiple crypto exchanges, mining, and institutional investors.
The service portfolio features Silvergate Exchange Network as a 24/7 payment-oriented platform. A scrutiny of the payment performance reveals it has executed over $1 trillion since its establishment in 2017.
The firm also provides a stablecoin infrastructure platform, digital asset custody management, and collateralized lending services to several institutional players in the cryptocurrency industry. Despite the vast network effects, the delayed Form 10-K filing is breaking its partnerships.
Late 10-K Filing Forcing Crypto Firms to Distance from Silvergate
The late 10-K filing convinced Coinbase, Bitstamp, Paxos, and Galaxy Digital to join Circle in downsizing the engagement scale with the crypto bank. Gemini warned its users’ community to suspend acceptance of deposits.
Besides wire transfers, Gemini informed users that it stopped processing withdrawals via Silvergate ACH. Cboe Digital and GSR agreed with the reduced ties adopted by Crypto.com, Wintermute, and Blockchain.com.
Surfacing Silvergate’s Financial Challenges
Silvergate financial challenges emerged in the last quarter of 2022 when the firm incurred a $1 billion net loss. The net loss arose following the sudden FTX collapse in November 2022.
The discovery of Silvergate Capital Corp’s dealings with the fallen FTX empire is the subject of a US Department of Justice (DoJ) investigation. Nonetheless, the DoJ is yet to lodge accusations of Silvergate dealings with FTX during Sam Bankman-Fried reign.
Silvergate’s Challenges Influence on Crypto Industry
Silvergate Capital is widely mentioned in a newly filed class-action suit by plaintiffs alleging FTX misappropriated users’ funds. The class-action lawsuit filed on February 14 alleges Silvergate facilitated the execution of the multibillion-dollar fraud orchestrated by Bankman-Fried.
While many firms dismissed concealing exposure to the troubled Silvergate Capital, the crypto bank processed $3.8 billion in deposits in the last quarter of 2022. Such exposure is inevitable even though the deposits suffered a steep decline from $11.9 billion in the third quarter of 2022.
Stock Prices Garners Bearish Steam
The news of 10-K filing and losses realized is adversely affected, with its stock price plummeting by over 58% to exchange hands at $5.57. The stock pricing shows massive erosion by 97% from $219.7, regarded as its all-time high accomplished during the November 2021 crypto bull.
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