Risk management methodology:
Lane also clarified its investment partnership with FTX and the company’s “strong risk management methodology” in the statement.
Alan Lane, CEO of Silvergate Capital, has criticized “short sellers” and “other opportunists” for distributing false information over the past several weeks to make a quick profit.
In a letter made public on December 5, Lane said that these parties were “plenty of speculating – and misinformation” to “capitalise on market uncertainty” brought on in part by FTX’s disastrous failure in November.
When there was suspicion that the company was exposed to the insolvent crypto lender BlockFi, his crypto-focused bank was recently obliged to refute one of these so-called FUD (fear, uncertainty, and doubt) tactics.
In addition, Lane utilized the most recent letter to the public as an “opportunity to clear the air” regarding its investment partnership with FTX and the business’ “robust risk management methodology.”
“Silvergate conducted significant due diligence on FTX and its related entities, including Alameda Research, both during the onboarding process and through ongoing monitoring, in accordance with our risk management policies and procedures.” Read more here: https://t.co/9nAViJOzoi
— Silvergate Bank (@silvergatebank) December 5, 2022
Lane reaffirmed that the company adheres to the USA PATRIOT Act and the Bank Secrecy Act, which call for it to monitor and carefully examine “each and every account,” including FTX and Alameda research.
During the onboarding process and throughout continuing monitoring, Silvergate “conducted considerable due diligence on FTX and its connected firms including Alameda Research,” the CEO said.
The CEO also praised the company’s “ample liquidity” and “resilient balance sheet,” noting that the deposits of clients are “safely held.”
In addition to the cash we have on hand, Lane said, “Our entire portfolio of investment securities can be pledged for borrowing at the Federal Home Loan Bank, other financial institutions, and the Federal Reserve Discount Window – and can ultimately be sold should we need to generate liquidity to meet customer withdrawal requests.”
Liquidity Position:
Genevieve Roch-Decter, a former portfolio manager and CFA-issued accountant, questioned whether Silvergate could maintain its liquidity position in a post on December 1 and whether it might suffer due to its close ties to FTX. Other speculators have also focused on Silvergate in recent weeks.
Roch-Decter was also concerned about Silvergate’s position in a Bitcoin-collateralized loan, which might affect the company’s financial sheet if the price of Bitcoin (BTC) keeps dropping.
She also voiced concern that a breach in the company’s Silvergate Exchange Network, which popular cryptocurrency exchanges use to transfer dollars and euros between accounts, may “bring down the entire system.”
The Silvergate Exchange Network enables the bank’s digital currency and institutional investor clients to send U.S. dollars and euros between their Silvergate accounts and the accounts of other Silvergate clients.
Here’s a graphic the company shared in February: pic.twitter.com/RKGLq1ZTSg
— Genevieve Roch-Decter, CFA (@GRDecter) November 30, 2022
Silvergate customers “continue to have access to their U.S. dollar deposits when they need them,” Lane said in the statement, “and Silvergate Exchange Network (SEN) has continued to operate without interruption throughout this period.”
The CEO continued, “We purposefully carry more cash and securities than our deposit liabilities connected to digital asset holdings.
Conclusion:
The share price of Silvergate (SI), which slid 8.49% to $24.24 on the New York Stock Exchange (NYSE) on Monday, did not respond much to Lane’s public letter, according to MarketWatch.
The stock price of Silvergate is currently down 52.43% over the past month and 85.34% over the past year.
