Lucy Jane 
Silvergate shuts Exchange Network, gives BlockFi $9.9M
Last week, Silvergate delayed submitting its yearly 10K financial report, raising concerns that cash flow issues may cause bankruptcy.
The bank is terminating its cryptocurrency payment network, citing a risk-based rationale.A website disclaimer for Silvergate stated:
“Effective immediately Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational.”
The same day, United States Judge Michael B. Kaplan issued a second ruling requiring Silvergate to repay $9,850,000 deposited by BlockFi.
According to papers released on the website of BlockFi’s restructuring counselor, the court ordered the bank to deliver the cash immediately after a November 2022 agreement between the two entities.
The collapse of the FTX last year also had an adverse effect on BlockFi and Silvergate.
Due to the crypto bear market, the crypto bank faced liquidity challenges, which were exacerbated by substantial withdrawals in the fourth quarter of 2022, resulting in a $1 billion net loss.
Silvergate allegedly borrowed $3.6 billion from the U.S. Federal Home Loan Banks System (FHLB), a consortium of 11 regional banks that offer loans to other banks and lenders, in an attempt to cushion the consequences of a spike in withdrawals.
In a report issued by the U.S. Securities and Exchange Commission (SEC), the digital asset bank detailed the significant withdrawals of deposits and the measures taken to preserve cash liquidity, including wholesale financing and the sale of debt securities.
Due to its affiliation with FTX and Alameda Research, the cryptocurrency bank faces class-action lawsuits.
When Silvergate put off sending in its annual 10K financial report last week, fears grew that a problem with cash flow could lead to bankruptcy.
Within twenty-four hours of the news coming out, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos all said they would cut their agreements with the bank.
MicroStrategy and Tether joined a growing list of companies that have openly denied having ties to the bank.
According to a February Short Interest Reports, Silvergate stock was the second-most shorted company in the United States, with approximately 72.5% of its shares shorted.