Crypto Bank Silvergate Says That Genesis’ Risk Is “Minimal”
The crypto-focused bank Silvergate said it hadn’t had much to do with the bankrupt lender Genesis.
The bank announced on Friday (January 20), one day after Genesis filed for bankruptcy. Three days after Silvergate reported a $1 billion loss due to the cryptocurrency market slump.
“While this continues to be a turbulent time in the digital asset industry. Silvergate’s exposure to Genesis is minimal, and customers’ deposits are and have always been safely held,” the company said.
“Silvergate’s deposit relationship with Genesis was less than $2.5 million as of both December 31, 2022, and January 19, 2023. Genesis is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans, and Silvergate has no outstanding loans nor investments in Genesis,” the company said.
On Thursday (January 19), Genesis filed for bankruptcy to protect itself and two of its lending businesses, Genesis Global Capital and Genesis Asia Pacific.
“While we have made significant progress refining our business plans to remedy liquidity issues caused by the recent extraordinary challenges in our industry, including the default of Three Arrows Capital and the bankruptcy of FTX, an in-court restructuring presents the most effective avenue through which to preserve assets and create the best possible outcome for all Genesis stakeholders,” Genesis Interim CEO Derar Islim said in a news release.
Genesis, a part of Digital Currency Group (DCG), owes about $3.4 billion to its 50 biggest creditors. In the bankruptcy filing, it was said that among these creditors were lenders. Who had a deal with Gemini Trust and are owed a total of about $766 million.
After its $1 billion loss, Silvergate said on Tuesday (January 17) that it was eliminating employment and taking other measures to stay in business.
“During the fourth quarter of 2022, the digital asset industry experienced a transformational shift, with significant over-leverage in the industry-leading to several high-profile bankruptcies,” the company said in a news release. “These dynamics created a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position across digital asset trading platforms.”
To handle customer withdrawals, crypto-focused Signature Bank borrowed billions from the federal mortgage system.
The Wall Street Journal said that Signature borrowed almost $10 billion from Federal Home Loans Bank in the fourth quarter. While Silvergate borrowed $3.6 billion. Last year, customers withdrew more money from both banks tied to cryptocurrencies.
