The Federal Reserve Board confirmed dropping all enforcement action against crypto-friendly Silvergate Bank.
The Federal Reserve Board (Board), in its July 26 statement, confirmed the termination of all enforcement action against crypto-friendly bank Silvergate. The bank suffered an implosion in March last year following the widespread fallout from the sudden collapse of the FTX crypto exchange.
In its Friday statement, the Board ended action against Silvergate Capital Corporation, indicating the establishment successfully wound down the operations. In particular, the announcement confirmed the customers’ reimbursement fully with the entity no longer running bank operations.
Silvergate Sudden Collapse
The Silvergate Bank collapsed in March 2023 following weeks of widespread speculation about the declined financial health. Market observers had pointed out the dire straits of the entity.
A month earlier, Silvergate ranked second in the most shorted stock across Wall Street. In particular, 72% of Silvergate’s stock was borrowed for traders to open short positions.
Matters worsened for Silvergate when it delayed releasing form 10-K against its early March date. Form 10-K involves an annual filing that offers investors insight into the financial health of the issuing company.
The US mandates all publicly listed companies to issue Form 10-K. The disclosure delay triggered a 31% nose dive for Silvergate stock.
Days after the signs of struggle manifested, Silvergate collapsed on March 8. The bank attributed the implosion to shortfalls sparked by the FTX collapse in November 2022. Unfortunately, Silvergate had a major client withdraw funds, compromising the bank’s financial health.
The Federal Reserve Board of Governors acknowledged offering oversight of Silvergate’s self-liquidation plan. The Board’s oversight was essential to guarantee that the liquidation plan optimized the client’s reimbursements.
Some injured parties expressed dissatisfaction with the liquidation plan despite the government oversight. The parties would level charges against the now-defunct bank. Chief executive Alana Lane would lead other executives exiting the bank in August 2023, alleging mounting legal troubles.
Silvergate Unfinished Legal Troubles
The move by the Board to end its enforcement action against Silvergate still leaves the former crypto-friendly bank with unresolved legal troubles. In particular, Judge Ruth Bermudez Montenegro allowed, in March 2024, the class action levelled against the bank to proceed. The case alleges Silvergate had an enabler role in the FTX fraud.
Additionally, the US Securities and Exchange Commission (SEC) announced suing Silvergate Capital Corporation this month. The SEC alleges the entity’s involvement with the FTX fraud.
Revolut Lands UK Banking Licence
Compared to Silvergate’s woes, fintech firm Revolut landed the UK banking license to end the three-year wait. The firm hailed the license as good fortune that would allow it to hold customers’ deposits and issue own-branded loans.
Revolut announced securing the banking license – though with restrictions – after three years since the fintech firm applied. The tentative approval by the Bank of England (BoE) is still within the mobilization stage for Revolut to build the banking operations that led up to the formal launch.
It is a milestone for the company, though it may still be some time before it can hold its customers’ deposits.
Revolut lodged the quest for the banking licence in 2021. The firm would confront the largest challenge of convincing regulators it addressed accounting issues and reputational concerns following the EU regulatory breaches. Notably, Revolut faced concerns over the corporate culture and delayed accounts filing.
The banking licence is a key win towards accelerating Revolut’s growth as it transitions from an e-money firm that intermediates consumers and licensed banks. It targets holding customer deposits and expanding income streams through own-branded mortgages and loans.
Revolut is set to meet stringent requirements, particularly in guaranteeing customer deposits capped at £85,000. The approval is projected to persuade regulators to follow suit.
Revolut’s founder, Nik Storonsky, hailed the license as a key milestone in making it the bank of choice for British customers.
Editorial credit: MacroEcon / Shutterstock.com
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