(Bloomberg) — Silvergate Capital Corp. shares slumped, putting them on pace to lose a quarter of their value this week, as investors punished the bank for its ties to the bankrupt FTX cryptocurrency exchange.
(Bloomberg) — Silvergate Capital Corp. shares slumped, putting them on pace to lose a quarter of their value this week, as investors punished the bank for its ties to the bankrupt FTX cryptocurrency exchange.
Shares of the company, which held deposits for FTX, dropped 9.9% to $25.14 at 1:03 p.m. in New York. Thursday’s nearly 11% drop triggered a short-sale circuit breaker. Data from S3 Partners indicates short interest levels in Silvergate are around 11% of the shares available for trading.
Sam Bankman-Fried’s sprawling crypto empire, which included FTX and trading firm Alameda Research, entered into bankruptcy last week after it became clear the exchange faced a shortfall of as much as $8 billion. The sudden failure raised questions about the threat of contagion, with companies spelling out their exposure as the fiasco sent the price of digital assets lower. Publicly traded companies with exposure to Bitcoin and other tokens have likewise suffered amid souring investor sentiment.
Silvergate’s decline follows the appearance of a letter on social media indicating FalconX would no longer be using Silvergate’s real-time payments platform or its wires. “We can confirm we sent communication to our clients changing settlement instructions for the time being,” a spokeswoman for FalconX said in an email. “The market is in an elevated risk environment, so therefore we are operating out of an abundance of caution.”
Silvergate said in an emailed statement that the company “and its entire banking platform were purpose-built to withstand periods of market volatility. The Silvergate Exchange Network continues to operate as designed, providing their clients with the ability to move US dollars in real-time 24 hours a day, seven days a week.”
The company said in a Nov. 11 statement that FTX represented less than 10% of the $11.9 billion in deposits from digital-asset providers it held as of Sept. 30. On Wednesday it said that, as of Nov. 15, deposits from digital-asset customers excluding FTX and related entities averaged about $9.8 billion.
“We didn’t have any type of relationship with FTX, Alameda Research or any of the other entities other than the deposit relationship,” Silvergate Chief Executive Officer Alan Lane said on a conference call Thursday.
–With assistance from Sidhartha Shukla.
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