Former Silvergate CEO Alan Lane said the crypto-friendly bank entered an orderly wind-down in 2023 under government and regulatory pressure, not because it had become insolvent.
In his review of the bank’s liquidation, Lane said Silvergate handled customer withdrawals equal to 70% of its demand deposits within a period of weeks in the fourth quarter of 2022. He wrote that no bank in U.S. history had previously made it through a deposit run of that scale.
Lane said Silvergate had already structured its balance sheet and liquidity management around the high volatility of the crypto sector. Although the bank was forced to sell some highly liquid assets at a loss to repay secured borrowings, he said it still had sufficient capital and liquidity and remained solvent throughout.
The run followed the 2022 crypto crisis
According to Lane, the 2022 crypto industry crisis pushed multiple funds and trading platforms into bankruptcy proceedings. Silvergate’s clients then sharply reduced their U.S. dollar deposits, triggering a bank run.
Lane said the Biden administration and several federal agencies later opened investigations into Silvergate and restricted banks from providing services to the crypto industry through regulatory policy.
Lane disputes criticism over risk and compliance
Lane said criticism of Silvergate mainly focused on three areas: heavy exposure to the crypto sector, interest-rate risk, and regulatory compliance.
He argued that business concentration did not mean an absence of risk management, and said Silvergate had made specific plans for sector-related risks. He also said the bank consistently used high-quality liquid assets to manage deposit swings and that no regulator had demonstrated a failure in its anti-money-laundering controls.
Silvergate says it did not fail because of insolvency
Lane said that after nine years serving the crypto industry, Silvergate did not collapse because of insolvency or exhausted liquidity. Instead, he said, it chose to end operations voluntarily under pressure.
On March 8, 2023, Silvergate announced an orderly liquidation and ceased operations.