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Crypto bank Silvergate Capital Corp. stands in the second position as most-shorted stock in the United States, with over 72.5% of its shares shorted, according to the latest Short Interest Reporting from Feb. 9.
The Financial Industry Regulatory Authority (FINRA) collects and publishes twice a month short interest positions of all equity securities. A short position means that investors and traders believe that the price of a security, such as a share, is going to decline in value. A short seller takes advantage of a stock's reduced price.
At the time of writing, Silvergate stock (SI) is down over 87% in the past twelve months. The bearish feeling on silvergate comes from its recent report on the profits and legal battles the company is facing over its relationship with failed ftx companies and alameda research.
On Jan. 17, the bank announced a $1 billion net loss attributable to common shareholders in the fourth quarter of 2022. According to a report from the United States Securities and Exchange Commission (SEC), Silvergate saw significant outflows of deposits during the period, which forced the company to seek wholesale funding and sell debt securities to maintain liquidity.
Related: Banks under pressure from U.S. authorities to cut ties with crypto firms
Silvergate reportedly borrowed $3.6 billion from the U.S. Federal Home Loan Banks System to mitigate effects of a surge in withdrawals following the collapse of crypto exchange FTX in November 2022.
The bank faces probes and lawsuits in the U.S. for allegedly aiding FTX on fraudulent activities, including lending and commingling user's funds. The company has been accused of "furthering FTX's investment fraud", while shareholders claim Silvergate violated the 1934 Securities Exchange Act. A Justice Department investigation is currently ongoing over the bank's role in FTX businesses.
Silvergate says alameda opened a bank account in 2018, before the launch of ftx. The company states that it did its due diligence at that time and continued to monitor the situation.
Moody’s Investors Service recently reacted to the bank situation, downgrading ratings of Silvergate Capital and its bank to "junk", with a negative outlook for both organizations.
Silvergate did not provide an immediate response to Cointelegraph's request for submissions.
