Silvergate Capital files for Chapter 11 bankruptcy in Delaware

Silvergate Capital Corporation files for Chapter 11 bankruptcy in the US Bankruptcy Court for the District of Delaware. 
Silvergate Capital Corporation files for Chapter 11 bankruptcy in the US Bankruptcy Court for the District of Delaware. 

Silvergate Capital Corporation, the parent company of Silvergate Bank, filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware. 

According to a filing on Sept. 17, the company has listed assets between $100 million and $500 million and liabilities ranging from $10 million to $50 million. The bankruptcy petition includes Silvergate’s two affiliates, Silvergate Liquidation Corporation and Spring Valley Lots LLC.

Silvergate’s reorganization plan, filed as part of its Chapter 11 bankruptcy, proposes fully paying several types of debts, including administrative fees, taxes and other high-priority claims like secured loans and professional fees. 

In contrast, certain claims related to common stock and securities lawsuits would be completely canceled. Debts between Silvergate’s internal companies are proposed to be reinstated, with preferred stockholders receiving partial payments based on their shares. 

The bankruptcy filing comes 18 months after the crypto-friendly bank shut down operations amid liquidity troubles. In March 2023, Silvergate’s parent firm announced that it would voluntarily liquidate its subsidiary and crypto arm, Silvergate Bank. At the time, the bank blamed the downfall on challenges in the banking system due to rising interest rates, along with regulatory scrutiny over crypto companies following FTX’s dramatic collapse a few months before, in November 2022. 

Related: Judge greenlights class suit alleging Silvergate Bank aided FTX fraud

The bank, known for its strong ties to the crypto industry, saw a sharp decline in confidence after FTX’s failure. In July, the US Securities and Exchange Commission filed a lawsuit against Silvergate Capital for allegedly helping facilitate fraud at the defunct exchange.

Later that same month, in a separate enforcement action, the Federal Reserve Board dropped all charges against the bank. According to an announcement, the decision was a result of Silvergate successfully winding down its operations, reimbursing customers and ceasing to operate as a bank.

The company’s bankruptcy is represented by the legal firm Richards, Layton & Finger, and Cravath, Swaine & Moore LLP, with AlixPartners serving as financial advisers.

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