• Coinbase Global Inc., a major cryptocurrency exchange, recently announced that it will no longer employ Silvergate Bank to make dollar payments for its institutional partners, following reports that the bank may be in financial problems.
  • Paxos Trust Company, LLC, an issuer of stablecoins, also declared that it will sever connections with Silvergate.

Coinbase Global Inc., a significant cryptocurrency exchange, recently announced that it would no longer employ Silvergate Bank to make dollar payments for its institutional partners following reports that the bank may have financial problems.

Paxos Trust Company LLC, an issuer of stablecoins, also declared that it would sever connections with Silvergate. The corporation stated that this would not affect its clients due to its “diverse banking partners.”

Citing a recent inquiry and the delay of a filing with the U.S. Securities and Exchange Commission by Silvergate Capital Corp., the parent company of Silvergate Bank, Coinbase said it would transfer to other banking partners to safeguard cash transactions.

Coinbase posted on Twitter that “Coinbase will be facilitating institutional client cash transactions with our other banking partners and have taken proactive action to help ensure that clients experience no impact from this change.”

Silvergate stated in the filing that a “number of circumstances” existed that would “negatively impact” the timing of the release. Further losses would also result in the bank being “less than well capitalized,” according to the corporation.

The firm also stated that it was evaluating the effect of these occurrences on “its ability to continue as a growing concern.”

In early morning trading, the value of Silvergate Bank stock dropped by more than 40%, to USD 7.60, in response to the announcement. The price of Coinbase’s shares decreased by 8% to USD 59.47.

As a result of Sam Bankman-crypto Fried’s exchange FTX Trading Ltd.’s collapse and insolvency, Silvergate has already incurred one billion dollars in losses in the previous quarter. This tragedy threw the whole crypto business chaos, prompting Silvergate to let off 40% of its employees in January, claiming economic concerns.

A class action lawsuit was also filed against the corporation due to its transactions with FTX, alleging that the company aided and encouraged the crypto exchange’s fraudulent conduct. Silvergate managed accounts for FTX and its sister business Alameda Research, both entangled in fraud schemes that ultimately led to their demise and the loss of consumer monies.

A leading publication reports that prosecutors in the Department of Justice’s fraud branch are also probing the bank for its alleged role in the FTX incident. Even though the bank is not accused of wrongdoing, investigators are concentrating on what the bank may have known about behind-the-scenes transactions.

In its SEC filing, Silvergate indicated that the company is now “reevaluating its business strategies in light of the business and regulatory challenges it currently faces.”