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Silvergate Ordered to Immediately Release $9.85M to Bankrupt Lender BlockFi

Tim Fries

Published: March 6, 2023 3:32 am

Last Updated: March 6, 2023 11:55 am

On Friday, March 3rd, the bankruptcy court ordered Silvergate bank to immediately release nearly $9.9 million to the cryptocurrency lender BlockFi. Both companies have sustained heavy damage in the wake of FTX’s collapse causing the bank to doubt its future viability, and the lender to file for chapter 11 protection already in late November.

Silvergate to Release $9.85 Million to BlockFi

According to documents made available on the website of BlockFi’s restructuring advisor, on March 3rd, the bankruptcy court ordered Silvergate Bank to immediately release $9.85 million to the bankrupt cryptocurrency lender. The order is in accordance with an agreement reached between the two companies in November 2022.

BlockFi’s FTX-related troubles started even before the exchange made the chapter 11 filing. On November 10th, a day after Binance pulled out of its non-binding agreement to acquire SBF’s company, the lender froze withdrawals from its platform. Just a few weeks later, on November 28th, BlockFi became the first company to file for bankruptcy in the aftermath of the collapse of FTX.

The effects of the contagion did not stop with BlockFi. January of this year saw a public feud between the Digital Currency Group and the Gemini Trust in the lead-up to the bankruptcy of another cryptocurrency lender—Genesis. Most recently, the domino effect stemming from the downfall of FTX brought one of the most important crypto-friendly banks—Silvergate—to death’s door.

Moody’s Downgrades Silvergate as the Banks Questions its Future Viability

Since the start of 2023, Silvergate has been under significant pressure. While an air of uncertainty has been lingering since November, things took a significant turn for the worse in January after a bank run that brought the bank’s deposits down to just over $3 billion got revealed. By mid-February, the company’s stock became the second-most shorted in the US.

The situation became even more dire on March 1st when the company postponed its K-10 filing indefinitely citing imminent Congressional, regulatory, and DoJ probes, as well as the damage it sustained over the previous months. The news caused Silvergate’s shares to plummet more than 50% in a single day, and led to the exodus of most of the bank’s major partners from within the digital assets industry.

By March 3rd, the deluge of issues led Moody’s to downgrade Silvergate for the second time in just two weeks. According to the report, Silvergate’s Wednesday filing “highlight significant governance deficiencies in terms of the bank’s risk management and its ability to properly assess and respond to abruptly changing operating conditions for its specialized business model, increasing the institution’s exposure to adverse developments.”

This article originally appeared on The Tokenist