Silvergate Bank Execs Exit Amid Ongoing Shutdown

Updated: 16 August 2023

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On Tuesday, a major shift occurred at Silvergate, the California-based bank renowned for its crypto-friendly approach, as CEO Alan Lane and Chief Legal Officer John Bonino left the firm. These departures are effective immediately and mark another significant milestone in the company’s ongoing wind-down process. Notably, Silvergate had filed for voluntary liquidation in March, according to a notice shared with the Securities and Exchange Commission.

#Silvergate CEO Alan Lane is resigning as the #California lender that offered a preview of the problems lurking on bank balance sheets continues to wind down. pic.twitter.com/TrsRS6Pz5H

— Global Capital Asset Management™ (@GCAssets) August 15, 2023

The shake-up at the top doesn’t end there. Antonio Martino, the Chief Financial Officer at Silvergate, is also set to leave the company; his departure is scheduled for September 30. While these executives will not be receiving further compensation from Silvergate after their departure, they are set to receive specified severance benefits, as outlined in the company’s public filings.

Earlier in May, as part of the shutdown process, Silvergate reduced its workforce significantly. A stark 230 employees, which once constituted a significant portion of the firm’s staff, were let go, leaving only a minimal crew to handle the operations. This was a significant move for a bank that once served prominent cryptocurrency clients such as Coinbase and Gemini.

Kathleen Fraher remains a key figure in the transition. Fraher, who has an impressive 17-year history as Silvergate’s Chief Risk Officer, is currently listed as the company’s Chief Transition Officer, according to her LinkedIn profile and the SEC filing.

This wind-down of operations follows in the wake of troubles that the bank faced in the turbulent cryptocurrency market. It came to light that during the last fiscal quarter of the previous year, users withdrew a massive $8.1 billion in crypto deposits from Silvergate.

This dramatic outflow occurred during the same period that saw the cryptocurrency exchange FTX collapse, a failure that significantly unsettled the digital asset market.

To maintain liquidity amidst this massive withdrawal storm, Silvergate took substantial steps: the company secured a loan for $4.3 billion from the Federal Home Loan Bank (FHLB) and sold around $5.2 billion in debt securities. The loan from FHLB, in particular, caught the attention of U.S. lawmakers, including Senator Elizabeth Warren (D-MA), who were quite critical of this action.

Government Concerns

In a letter, a bipartisan group of senators, led by Warren, raised concerns about Silvergate’s connection to FTX. They directly challenged Lane and his company, accusing them of introducing further cryptocurrency market risks into the conventional banking system.

The move to wind down Silvergate’s operations has not occurred in isolation. Other crypto-friendly banks, including Silicon Valley Bank (SVB) and Signature Bank, have also encountered failures.

One of the pillars of Silvergate’s business model was its instant settlement platform, SEN, which was particularly popular among institutional crypto clients engaging in round-the-clock transfers. However, the Federal Deposit Insurance Corporation (FDIC) released a report on Monday that pointed out the risks of serving multiple crypto clients simultaneously, highlighting the potential liquidity issues such a practice can pose.

In sum, Silvergate’s journey from being a prominent, crypto-friendly bank to its current state of wind-down has been marked by significant challenges, demonstrating the complex and volatile nature of intertwining traditional banking with the burgeoning world of digital assets.