Coinbase, a US-based crypto exchange platform, has closed its collaboration with its USD banking partner, Silvergate Bank. The bank cited recent developments as the reason for the move.
In the tweet posted on March 2nd, Coinbase said, “due to recent events and out of caution, Coinbase will no more initiate and accept payment from or to Silvergate.”
Coinbase To Use Signature Bank For Cash Transactions
According to Coinbase, it will conduct cash transactions for its prime customers through Signature Bank, its other banking partner. Meanwhile, Silvergate Bank’s shares are already experiencing pressure due to the postponement of its yearly 10-K report.
In pre-market trading, the bank’s stocks plummeted by 40%. Moreover, JP Morgan, a global leader in financial services, has downgraded Silvergate Capital’s rating from “neutral” to “underweight” in response to the possibility of insolvency.
The US Securities and Exchange Commission (SEC) mandates that companies produce a 10-K report summarizing their financial state and business operations. The crypto bank announced it would require an extra fortnight to finalize its 2022 fiscal year report.
According to Coinbase, its recent resolution will not affect payment directives in Euros or Pounds. Silvergate Bank, recognized as the “crypto bank” due to its numerous crypto partnerships, is under scrutiny by the US Department of Justice (DoJ) for its role in the FTX collapse.
The investigation centers on the bank’s handling of the account of Sam Bankman-Fried, the former CEO of FTX.
More Woes For Silvergate Bank
Meanwhile, Silvergate Bank and Alan Lane, its CEO, are facing another civil lawsuit. On February 14th, lawyers filed a class-action lawsuit in the US District Court for the Northern District of California on behalf of a former FTX user.
Soham Bhatia, the plaintiff in San Francisco, allegedly lost access to approximately $20,000 worth of crypto during the exchange’s collapse last year. The lawsuit alleged that the company and its CEO “aided and abetted” a multibillion-dollar Ponzi scheme devised by Sam Bankman-Fried and his two entities, Alameda Research and FTX.
Bhatia claims that Silvergate Bank, its CEO, and its parent firm, Silvergate Capital Corporation knew about Alameda Research’s misuse of FTX customer funds. Bhatia accused them of hiding “FTX’s actual nature” from its users.
The lawsuit aims to obtain compensatory damages, disgorgement of profits, and restitution, with the precise amount to be established during the trial. Due to the continuing investigations and dissolution of partnerships, Silvergate has become one of the most heavily shorted stocks in the present market.
Per the Financial Industry Regulatory Authority, over 72% of Silvergate Capital’s stock had been shorted by the end of January.