Silvergate Capital Corporation (SCC), which owns Silvergate Bank, one of the leading banking service providers to the embattled crypto sector, told the U.S. Securities and Exchange Commission (SEC) late Wednesday afternoon that it would be unable to file its 2022 annual financial report before the extended March 16 deadline, causing its share price to collapse and raising fears of another major contagion event for the cryptocurrency industry.
In a ‘Notification of Late Filing’ submitted to the SEC, the company laid out the reasons for the delay, writing that their financial situation has deteriorated beyond the $948.7 million in losses for 2022 which they revealed in their January 17 preliminary report. These new developments included “the sale of additional investment securities” in January and February, “primarily to repay in full the Company’s outstanding advances from the Federal Home Loan Bank of San Francisco” which will result in “other-than-temporary impairment on the securities portfolio.”
Coinbase safeguards client cash by storing it in FDIC-insured U.S. banks. In cases where a client has a considerable dollar balance, Coinbase ensures additional protection and liquidity by holding their cash in a U.S. government money market fund. The decision to switch to Signature Bank comes after cryptocurrency-friendly bank Silvergate Capital suffered a significant blow following the collapse of Sam Bankman-Fried’s FTX.
The bank’s shares plunged by as much as 50% after the crypto-friendy bank stated that it would not be able to meet the March 16 deadline for submitting its annual report. It is currently studying whether it is still viable and is reviewing its financial controls.The company’s stock, traded under the ticker COIN, has paused its growth on the Nasdaq Stock Market, trading at $58, down over 9% on a broader seven-day basis, after hitting the $67.40 mark at the end of February. COIN has a market capitalization of $15.3 billion as of press time.
On the other hand, Silvergate shares have plunged 29% premarket after delaying its annual report and raising concerns among investors. Silvergate’s stock under the ticker SI closed the market on Wednesday at $13.50 and is currently trading at $7.75 on the Nasdaq, down 80%, after a solid first quarter, reaching $22 on February 16. Previously, Silvergate reported a loss of $1 billion in the fourth quarter of 2022 as investors withdrew capital amid the FTX debacle.
The company said in a filing to the U.S. Securities and Exchange Commission that it would be unable to file its annual report and further extended the deadline for filing it to March 16. Silvergate Bank also mentioned in the filing that it had sold the additional debt to repay its loans in 2023. The company added:
The Company is evaluating the impact that these subsequent events have on its ability to continue as a going concern for the twelve months following the issuance of its financial statements. The Company is currently in the process of reevaluating its businesses and strategies in light of the business and regulatory challenges it currently faces.
