The Federal Reserve Board said June 1 that it issued a consent order to the crypto-friendly bank Silvergate, instructing it to wind down operations.

Must protect depositors

Silvergate Capital Corporation and Silvergate Bank must submit a shutdown plan to supervising agencies within ten days of the June 1 order. Silvergate must then adopt its plan ten days after it receives approval from supervisors.

The company is supervised by the Federal Reserve Bank of San Francisco and California’s Department of Financial Protection and Innovation (DFPI).

The text of the latest order said that Silvergate’s shutdown process must protect depositors and the Deposit Insurance Fund. This means the company must maintain staff, manage financial instruments, and maintain records to the benefit of depositors.

The order said that Silvergate could not make certain transactions or expand its business without regulatory approval. The order specifically disallows “golden parachute” agreements that could excessively compensate new or reassigned executives.

Time’s up

Silvergate initially announced voluntary self-liquidation on March 8.

The company’s issues began days earlier on March 1, when Silvergate it would file a late 10-K form and said that it was considering its ability to “continue as a going concern.” That news, combined with earlier reports of inquiries, led to a bank run.

The order also notes that Silvergate began to experience a decline in deposits in late 2022 following the collapse of FTX. Silvergate is cooperating with regulators by providing documents and evidence related to its relationship with FTX and Alameda. It will continue to cooperate following its shutdown, the order says.

Though Silvergate’s total shutdown is still pending, one of its main services — the Silvergate Exchange Network (SEN) — was discontinued in March.

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