Silvergate backs off after delaying annual report, warning of futility

March 1 (Reuters) – Cryptocurrency-focused lender Silvergate Capital warned of a delay in its annual report and said it was assessing its ability to operate as a going concern on Wednesday, sending its shares down by more than a quarter in after-hours trading.

Silvergate reported a $1 billion loss in the fourth quarter as investors raced to withdraw deposits in the wake of the bankruptcy of cryptocurrency exchange FTX, and the company’s woes highlight the fragility of trust in digital assets.

The company said it would not be able to meet an extended March 16 deadline for submitting its annual report. It also said, in a filing with the Securities and Exchange Commission, that it sold additional debt securities to pay off debt this year and that more losses would mean the bank may be “less than well capitalized.”

“It is assessing the impact of these subsequent events on its ability to continue as a going concern,” Silvergate said. “The company is currently re-evaluating its business and strategies in light of the commercial and regulatory challenges it is currently facing.”

Shares fell nearly 32% to $9.24 in after-hours trading, suggesting the stock could open at a three-year low on Thursday.

Silverjet stock is down about 96% from its record closing high in November 2021.

Federal prosecutors in Washington are investigating Silvergate in La Jolla, California and its dealings with FTX and Alameda Research business. In January, three US senators asked Silvergate for details on risk management and FTX.

Wayne Huang, co-founder and CEO of Taipei-based global US dollar cryptocurrency exchange XREX, said the issues highlighted just how interdependent and vulnerable crypto banking has become.

“This highlights the importance of a strong banking network for crypto companies, rather than an over-reliance on just several banks,” he said. Broader digital asset markets have been relatively quiet, though bitcoins made slight progress despite the US dollar’s slide, last bought at $23,457.

said Matthew Dipp, chief investment officer of crypto asset manager, SpaceX Capital.

Reuters reported last month that global cryptocurrency exchange Binance had secret access to a Silvergate account belonging to its alleged independent US partner and transferred large sums of money from the account to a trading company run by Binance CEO Changpeng Zhao.

(Reporting by Noel Randwich) Additional reporting by Ray Wei and Tom Westbrook in Singapore. Edited by Lincoln Feast.

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