Silvergate Bank, a fintech bank known as the “crypto bank” due to its numerous crypto partners, has been facing a series of setbacks that have impacted its stocks. The bank’s shares have fallen by 40% in pre-market trading due to a delay in the submission of its annual 10-K report and a downgrade by JP Morgan from “neutral” to “underweight.” The 10-K report is a required document that provides an overview of a company’s business and financial situation, and Silvergate Bank stated that it would need an additional two weeks to complete its report for the 2022 fiscal year.
Silvergate Bank’s problems began with the collapse of the cryptocurrency exchange FTX, in which the bank was implicated. The US Department of Justice is currently investigating Silvergate Bank’s involvement in the FTX collapse, focusing on the bank account that former FTX CEO Sam Bankman-Fried had with the bank. In addition, Silvergate Bank and its CEO, Alan Lane, were accused of “complicity” in a “multibillion-dollar fraudulent scheme orchestrated by Sam Bankman-Fried (SBF)” and two of his entities, FTX and Alameda Research, in another civil lawsuit.
These ongoing investigations and the termination of partnerships have made Silvergate one of the most shorted stocks in the current market. According to the Financial Industry Regulatory Authority, over 72% of Silvergate Capital’s shares were shorted at the end of January. These challenges have added significant pressure to Silvergate Bank’s stocks, making investors skeptical about the bank’s future prospects.
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