- Silvergate said that its deposit relationship with BlockFi is limited to less than $20 million of its total customer deposits on BlockFi.
- BlockFi is not a custodian of Silvergate’s Bitcoin-collateralized SEN leverage loans.
- Silvergate maintains a “first priority lien and security interest in a cash collateral account” of $10 million “for the benefit of Silvergate to support ACH services provided to BlockFi.”
Crypto bank Silvergate’s (SI) deposit relationship with BlockFi is limited to less than $20 million of its total deposits from all digital asset customers. The company said this on Monday, hours after the crypto lender filed for bankruptcy.
Silvergate was quick to clarify BlockFi is not a custodian of its Bitcoin-collateralized SEN leverage loans. The crypto-focused bank also said that it has no investments in BlockFi.
“As the digital asset industry continues to transform, I want to reiterate that Silvergate’s platform was purpose-built to manage stress and volatility,” said Silvergate CEO Alan Lane. “The SEN continues to operate as designed, and our support teams are available 24 hours a day, 7 days a week to help our customers during this period of adversity.” Silvergate added that it maintains a “first priority lien and security interest in a cash collateral account.” This account has $10 million “for the benefit of Silvergate to support ACH services provided to BlockFi.”
Silvergate’s announcement comes just hours after BlockFi filed for Chapter 11 bankruptcy. Filings show that the crypto lender has $257 million in cash on hand and $1-10 billion in total assets and liabilities. FTX US and the Securities and Exchange Commission (SEC) are among its largest creditors.
Silvergate has been having a rough time since the collapse of Sam Bankman-Fried’s FTX crypto empire. While the bank has said that it has no material exposure to FTX, it has admitted to having about $1 billion in deposits on FTX. This represents less than 10% of all of its customer deposits.
Ties to FTX, together with a crashing revenue, have massively undermined investor confidence in the company. The firm’s stock has been on a downward trend for a month as a result. It is currently trading at around $26. This is about 60% lower than at the start of November, according to data from Yahoo! Finance.
However, it seems that there are others who believe in Silvergate. Founder and CEO of EOS developer Block.one Brendan Blumer personally, and through his firm, acquired 2,934,537 shares of Silvergate last week. This has made him the largest shareholder of the company, controlling 9.27%.
On the Flipside
- It’s unclear whether Silvergate has any other exposure to BlockFi.
- It’s unknown what will happen to the $20 million that Silvergate is referring to.
Why You Should Care
Silvergate is the largest crypto-focused bank in the industry. While Silvergate denies having large exposure to FTX and BlockFi, it’s unclear whether the bankruptcies of both of them will affect the bank.
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