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Things seem to go from sinister to sinister at Silvergate Bank, with a blow to its morose note and a sale through Ark Invest. The bank has already seen a period of growth and has been linked with the collapse of the FTX.
Ark Invest, the investment vehicle of Cathy Wood, sold off more than 400,000 shares of parent company Silvergate Capital, worth $4.3 million on Jan. 6, leaving it with a mere 4,000 shares, according to various media reports. They lost 43% of what they were worth the day before.
Moody's Investors Service has also reacted to the bank's situation, lowering its Silvergate Capital and bank ratings. The bank's rating of long-term deposits increased from baa2 ("lower middle grade") to ba1 ("junk") and its long-term rating from ba2 to b1 ("junk"), Both organisations have a negative outlook.
Related: Block.one and its CEO become largest SilvergateCapital shareholders
Moody's attributed its decision to the decrease in deposits, losses resulting from the sale of securities to meet liquidity needs and layoffs. Moody’s vice president Sadia Nabi said in a statement:
“Almost all of the bank's deposits continue to be from crypto currency centric institutions, and while the bank currently has adequate liquidity and capital, continued large outf[l]ows of these deposits would further adversely impact the bank's f[i]nancial condition.”
Silvergate Bank lost $718 million as it liquidated debt to cover $8.1 billion in withdrawals, according to reports on Jan. 5. It has also laid off 40% or approximately 200 employees. Crypto deposits were also down 68% in Q4 2022.
"Moody's downgrades Silvergate Bank's long term deposit rating to Ba1, outlook negative" @MoodysInvSvc $SI
— Richard Christopher Whalen (@rcwhalen) January 6, 2023
The bank had come under the scrutiny of legislators after allegations that it facilitated transfers between FTX and its sister-company Alameda Research. Three senators headed by Senator Elizabeth Warren sent a letter to Silvergate CEO Alan Lane Dec. 6 asking for the allegations to be explained. On December 16, FTX investors sued Lane, the bank and Silvergate Capital for the same allegations.
