Silvergate to Die Within a Week: Short Seller Predicts
- Veteran short seller Marc Cohodes has predicted that Silvergate will die within a week while sharing pictures of the firm’s deserted office.
- Cohodes said that “Silvergate is a publicly traded crime scene” and added that the CEO of the company, Alan Lane, belongs in prison.
- The fintech firm confirmed that it would close its digital assets’ payment network, the Exchange Network.
- United States Judge Michael B. Kaplan ordered the bank to return $9,850,000 deposited by bankrupt crypto lender BlockFi.
The crypto community is speculative regarding the fact that popular fintech firm and crypto bank, Silvergate, will be able to survive its crashing stock price and bearish investor sentiment or will it file for Chapter 11 bankruptcy. Putting things into perspective, popular short seller Marc Cohodes, who is known for his attacks on the Nasdaq-listed company since last year, has predicted that the firm will die within a week.
The short seller shared several images of the deserted office belonging to Silvergate and predicted that the firm will close down within a week. In a statement given to TheBlock, the veteran trader stated that ”Silvergate is a publicly traded crime scene” and added that the CEO of the company, Alan Lane, belongs in prison.
“I would be very surprised if the bank is open next week,” Cohodes said.
It is crucial to note that Silvergate got into trouble after it revealed that it had exposure to the now bankrupt crypto exchange FTX and its sister trading company, Alameda Research. Interestingly, the stock price of the crypto bank also declined by more than 90% in the last six months, which led to the company’s long-term issuer rating being downgraded by Moody’s on Friday.
Moody’s also warned of further rating cuts after Silvergate told the US Securities and Exchange Commission (SEC) that it may be “less than well-capitalized” and delayed filing its annual financial report. The company told the regulator in a filing that it needed additional time to “perform analysis, record journal entries related to subsequent events and to complete management’s evaluation of internal controls over financial reporting.”
After the delay, several crypto firms cut ties and distanced themselves from the troubled crypto firm. Firms like MicroStrategy, Tether, Coinbase, Circle, Bitstamp, Galaxy Digital, and Paxos stated that they would scale back their relationship with Silvergate. Moreover, Crypto.com, Blockchain.com, Wintermute, GSR, and Cboe Digital also did the same.
Silvergate Shuts Down the Exchange Network
Within 24 hours of Moody’s downgrade, the fintech firm confirmed that it would close its digital assets’ payment network, the Exchange Network, adding that the termination is a “risk-based decision.” The company’s website displayed the following message:
“Effective immediately, Silvergate Bank has made a risk-based decision to discontinue the Silvergate Exchange Network (SEN). All other deposit-related services remain operational.”
On the other hand, United States Judge Michael B. Kaplan ordered the bank to return $9,850,000 deposited by BlockFi, a bankrupt crypto lender that had exposure to FTX and is also a contestant in the shares of American fintech company, Robinhood that were purchased by Sam Bankman-Fried last year.
The court has ordered the crypto bank to immediately release the funds following an agreement between the two companies in November 2022, as per the documents posted on the website of BlockFi’s restructuring advisor.