March 10, 2023

USA: Silvergate Capital Announced On Wednesday 3/8 Its Intent To Wind Down Operations And Voluntarily Liquidate Banking Unit. Silicon Valley Bank collapses On Friday 3/10 FDIC Seized Assets

I added the statement to the screenshot I took above.
written by Rita Liao
Wednesday March 8, 2023 at 11:36 PM PST

Silvergate Capital Corporation, the holding company of crypto-focused Silvergate Bank, announced Wednesday its intent to wind down operations and voluntarily liquidate the banking unit.

The move came days after Silvergate shocked the industry with news that it was facing a financial crisis. The institution, which was one of the few banks that acted as an intermediary in the space of institutional crypto, is yet another victim of the “crypto winter” following the implosion of FTX, which used the bank to transfer customer funds.

The bank was founded three decades ago in California as a small local lender, but in recent years, it had soared to become a key player in the crypto industry. Its fortune also rose and fell with market volatility. As token prices boomed, deposits at Silvergate surged from around $2 billion in 2020 to over $10 billion in 2021. But by the end of 2022, its deposits slumped to $6.3 billion, a decrease of over 50% from just three months earlier.

At the time of FTX’s collapse last fall, Silvergate tried to reassure investors and regulators that its exposure to the digital assets exchange was limited.

“As of September 30, 2022, Silvergate’s total deposits from all digital asset customers totaled $11.9 billion, of which FTX represented less than 10%. Silvergate has no outstanding loans to nor investments in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans. To be clear, our relationship with FTX is limited to deposits,” Alan Lane, Silvergate’s CEO, wrote in a statement in November.

But the government looked elsewhere. U.S. prosecutors in the Justice Department’s fraud unit were investigating Silvergate’s dealings with FTX and Alameda Research, Bloomberg reported in February.

The shutdown of Silvergate will deal a big blow to how money moves in and out of the crypto world. On March 3, the bank announced it would discontinue the Silvergate Exchange Network (SEN), its crypto payments network that enabled dollar transfers between investors and crypto exchanges 24/7. The volatile nature of cryptocurrencies means very few financial institutions want to touch crypto.

It looks like Silvergate’s customers are at least getting their deposits back. As the company said in its latest statement:

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward. The Bank’s wind down and liquidation plan includes full repayment of all deposits. The Company is also considering how best to resolve claims and preserve the residual value of its assets, including its proprietary technology and tax assets.”
Fox Business published March 10, 2023: John Carney: US will probably have more bank failures ahead. 'Breitbart Business Digest' co-author and economics and finance editor John Carney reacts to the FDIC taking control of Silicon Valley Bank deposits on 'Kudlow.'
Altcoin Daily published March 10, 2023: ๐Ÿšจ Largest US Bank FAILURE (just like 2008)! ⚠️ 'LAST CHANCE' Pull your money out! Silicon Valley Bank (one of the nation's largest) has failed. ⚠️ Depositors are unable to withdraw money. SVB was the second biggest bank failure in U.S. history after the collapse of Washington Mutual in 2008.
I added the statement to the screenshot I took above.
DNA India
written by Staff
Friday March 10, 2023

Silicon Valley bank was the 16th largest bank in the US, holding $210 billion in assets.

The Federal Deposit Insurance Corporation seized the assets of Silicon Valley Bank on Friday, marking the largest bank failure since Washington Mutual during the height of the 2008 financial crisis.

The bank failed after depositors, mostly technology workers and venture capital-backed companies, began withdrawing their money creating a run on the bank.

Silicon Valley was heavily exposed to the tech industry and there is little chance of contagion in the banking sector as there was in the months leading up to the Great Recession more than a decade ago. Major banks have sufficient capital to avoid a similar situation

The FDIC ordered the closure of Silicon Valley Bank and immediately took possession of all deposits at the bank Friday. The bank had USD 209 billion in assets and USD 175.4 billion in deposits at the time of failure, the FDIC said in a statement. It was unclear how much of the deposits was above the USD 250,000 insurance limit at the moment.

Notably, the FDIC did not announce a buyer of Silicon Valley's assets, which is typically when there's an orderly wind down of a bank. The FDIC also seized the bank's assets in the middle of the business day, a sign of how dire the situation had become.

The financial health of Silicon Valley Bank was increasingly in question this week after the bank announced plans to raise up to USD1.75 billion in order to strengthen its capital position amid concerns about higher interest rates and the economy.

Shares of SVB Financial Group, the parent company of Silicon Valley Bank, had plummeted nearly 70 per cent before trading was halted before the opening bell on the Nasdaq. CNBC reported that attempts to raise capital failed and the bank was now looking to sell itself.

Silicon Valley bank was not a small bank, it's the 16th largest bank in the country, holding USD 210 billion in assets. It acts as a major financial conduit for venture capital-backed companies, which have been hit hard in the past 18 months as the Federal Reserve has raised interest rates and made riskier tech assets less attractive to investors.

Venture capital-backed companies were reportedly advised to pull at least two months' worth of ‘burn’ cash out of Silicon Valley Bank to cover their expenses. Typically VC-backed companies are not profitable and how quickly they use the cash they need to run their businesses, their so-called ‘burn rate’, is a typically important metric for investors.

Diversified banks like Bank of America and JPMorgan pulled out of an early slump due to data released Friday by the Labor Department, but regional banks, particularly those with heavy exposure to the tech industry, were in decline. Yet it has been a bruising week. Shares of major banks are down this week between 7 percent and 12 percent.


written by Hugh Son, Rohan Goswami, and Jonathan Vanian
Friday March 10, 2023

On Wednesday, Silicon Valley Bank was a well-capitalized institution seeking to raise some funds.

Within 48 hours, a panic induced by the very venture capital community that SVB had served and nurtured ended the bank’s 40-year-run.

Regulators shuttered SVB Friday and seized its deposits in the largest U.S. banking failure since the 2008 financial crisis and the second-largest ever. The company’s downward spiral began late Wednesday, when it surprised investors with news that it needed to raise $2.25 billion to shore up its balance sheet. What followed was the rapid collapse of a highly-respected bank that had grown alongside its technology clients.

Even now, as the dust begins to settle on the second bank wind-down announced this week, members of the VC community are lamenting the role that other investors played in SVB’s demise.

“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor at Restive Ventures, told CNBC. “This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face.”

The episode is the latest fallout from the Federal Reserve’s actions to stem inflation with its most aggressive rate hiking campaign in four decades. The ramifications could be far-reaching, with concerns that startups may be unable to pay employees in coming days, venture investors may struggle to raise funds, and an already-battered sector could face a deeper malaise.

The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. It had been forced to sell all of its available-for-sale bonds at a $1.8 billion loss, the bank said late Wednesday.

The sudden need for fresh capital, coming on the heels of the collapse of crypto-focused Silvergate bank, sparked another wave of deposit withdrawals Thursday as VCs instructed their portfolio companies to move funds, according to people with knowledge of the matter. The concern: a bank run at SVB could pose an existential threat to startups who couldn’t tap their deposits.

SVB customers said CEO Greg Becker didn’t instill confidence when he urged them to “stay calm” during a call that began Thursday afternoon. The stock’s collapse continued unabated, reaching 60% by the end of regular trading. Importantly, Becker couldn’t assure listeners that the capital raise would be the bank’s last, said a person on the call.

Death blow

All told, customers withdrew a staggering $42 billion of deposits by the end of Thursday, according to a California regulatory filing.

By the close of business that day, SVB had a negative cash balance of $958 million, according to the filing, and failed to scrounge enough collateral from other sources, the regulator said.

Falvey, a former SVB employee who launched his own fund in 2018, pointed to the highly interconnected nature of the tech investing community as a key reason for the bank’s sudden demise.

Prominent funds including Union Square Ventures and Coatue Management blasted emails to their entire rosters of startups in recent days, instructing them to pull funds out of SVB on concerns of a bank run. Social media only heightened the panic, he noted.

“When you say, `Hey, get your deposits out, this thing is gonna fail,′ that’s like yelling fire in a crowded theater,” Falvey said. “It’s a self-fulfilling prophecy.”

Another venture investor, TSVC partner Spencer Greene, also criticized investors who “were wrong on the facts” about SVB’s position.

“It appears to me that there was no liquidity issue until a couple of VCs called it,” Greene said. “They were irresponsible, and then it became self-fulfilling.”

‘Business as usual’

Thursday evening, some SVB customers received emails assuring them that it was “business as usual” at the bank.

“I’m sure you’ve been hearing some buzz about SVB in the markets today so wanted to reach out to provide some context,” one SVB banker wrote to a client, according to a copy of the message obtained by CNBC.

“It is business as usual at SVB,” the banker wrote. “Understandably there may be questions and I want to make myself available if you have any concerns.”

By Friday, as shares of SVB continued to sink, the bank ditched efforts to sell shares, CNBC’s David Faber reported. Instead, it was looking for a buyer, he reported. But the flight of deposits made the sale process harder, and that effort failed too, Faber said.

Falvey, who started his career at Wells Fargo and consulted for a bank that was seized during the financial crisis, said that his analysis of SVB’s mid-quarter update from Wednesday gave him confidence. The bank was well capitalized and could make all depositors whole, he said. He even counseled his portfolio companies to keep their funds at SVB as rumors swirled.

Now, thanks to the bank run that ended in SVB’s seizure, those who remained with SVB face an uncertain timeline for retrieving their money. While insured deposits are expected to be available as early as Monday, the lion’s share of deposits held by SVB were uninsured, and it’s unclear when they will be freed up.

“The precipitous deposit withdrawal has caused the Bank to be incapable of paying its obligations as they come due,” the California financial regulator stated. “The bank is now insolvent.”

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