Silvergate stock plummeted in after-hours trading Wednesday as the crypto-friendly bank delayed filing its 10-K report with the SEC. Full details.
Summary
Crypto news concerning the SEC: delays by Silvergate
Silvergate Capital Corporation, the parent company of Silvergate Bank, delayed the filing of its annual 10-K report with the US Securities and Exchange Commission on Wednesday, telling the agency that it needs additional time to allow an independent accounting firm to complete certain audit procedures.
In the filing, Silvergate also cited a number of circumstances that will negatively impact the timing of the 10-K report.
These include the sale of additional investment securities beyond what was previously planned and disclosed in the company’s earnings release, as well as the sale of additional debt securities in January and February 2023, from which Silvergate expects to record additional losses.
In this regard, Silvergate stated the following:
“These additional losses will have an adverse impact on the regulatory capital ratios of the Company and the Company’s wholly owned subsidiary, Silvergate Bank […] and could result in the Company and the Bank being less than well capitalised.”
Silvergate (SI) stock was trading at $13.53 Wednesday at the closing bell, but plunged as much as 31.7% on the tail end of the news in after-hours trading, falling well below $10.
Silvergate’s situation: affected by FTX’s collapse
Silvergate reported a net loss of $1 billion and a drop in customer deposits of about $14 billion in the last quarter of 2022, citing the planned reduction in bank deposits of digital assets along with industry-wide chaos.
Bank deposits were shaken in the aftermath of the FTX collapse, prompting it to tap the Federal Home Loan Bank (FHLB) for a $4.3 billion loan in January and sold about $5.2 billion in debt securities, according to company documents.
Silvergate, which was hit by a class action lawsuit alleging that it directly aided FTX’s fraudulent activities in December, is also one of the top selling stocks on Wall Street, with as much as 71% of all the company’s shares being available for investors to buy and sell as they are short positions, according to MarketWatch .
In his Wednesday filing with the SEC, Silvergate also said that he is currently analyzing some regulatory and other inquiries and investigations that are pending with respect to the Company.
Silvergate added that it is now in the process of reevaluating its activities and strategies in light of the business and regulatory challenges it currently faces.
The SEC’s opinion on crypto: focus on Bitcoin
Recently, there was a lot of buzz about an interview given by current SEC Chairman Gary Gensler to New York Magazine, where he stated that all crypto, except Bitcoin, can be likened to security tokens.
The interview covered the crypto winter, the FTX case, and the current state of the crypto markets. However, the most interesting passage is about cryptocurrencies, security tokens, and Bitcoin.
According to Gensler, all cryptocurrencies would be securities, all except Bitcoin. Specifically, this passage caused a stir because there are cryptocurrencies such as Ethereum, or Litecoin, that do not seem much different from Bitcoin.
In any case, Gensler explained his reasoning. Arguing, specifically, that the SEC would already now have all the legal tools it needs to intervene in the crypto markets.
This is partly because he believes that virtually every type of crypto transaction already now falls under the jurisdiction of the SEC, with the exception of spot transactions in Bitcoin and those whereby people pay for purchases of goods or services in cryptocurrencies.
Indeed, he argues that there are groups of entrepreneurs, foundations or individuals behind cryptocurrencies, and that these to date use a variety of complex and legally opaque mechanisms solely to promote their tokens and attract investors by promising financial returns.
Bitcoin, on the other hand, as of today has no one behind it, and there is no one promoting its sale by promising financial returns. Moreover, commodities can be sold freely in the market in a totally legal way.
In contrast, in order to legally sell securities, they need to be offered to the public only by accompanying them with a prospectus approved by agencies such as the SEC.
Such a prospectus does not exist for cryptocurrencies, nor does SEC approval. Thus, in the US, cryptocurrencies that will be considered securities (unregistered) will no longer be able to be sold legally without an SEC-approved prospectus. Something similar could subsequently happen in other jurisdictions as well.
