1) A bank built around crypto
Silvergate Bank became one of the main banks used by cryptocurrency companies and exchanges.
During the crypto boom (2020–2021):
- Huge amounts of crypto cash were parked there
- Deposits exploded
- The stock price surged
So the company’s value depended heavily on the health of the crypto market.
2) The shock: FTX collapse
When the major crypto exchange FTX failed in late 2022, panic spread across the industry.
Crypto firms rushed to pull their money out of Silvergate.
This created a bank run:
- Billions of dollars withdrawn in a very short time
- Deposits dropped dramatically within one quarter
3) Why the bank couldn’t survive
Banks don’t keep all cash sitting idle — they invest deposits into bonds and long-term assets.
To return money quickly, Silvergate had to:
- Sell those assets early
- Take huge losses
The business model only worked if crypto money stayed inside the bank.
Once withdrawals started, the losses became unavoidable.
4) March 2023: shutdown
The bank announced it would voluntarily liquidate.
Important difference:
- Customers (depositors) were repaid
- Shareholders were not protected
5) What happened to investors
This is the key point.
Shareholders sit last in line during liquidation.
After paying:
- Depositors
- Creditors
- Legal obligations
Nothing meaningful was left.
So:
- Stock price crashed
- Market value wiped out
- Investors effectively lost their equity
Later the parent company entered bankruptcy to finish winding down operations.
6) Aftermath
Regulators and investors later accused the company of hiding or downplaying risks related to crypto exposure, leading to lawsuits and financial penalties.
The simple takeaway
Silvergate wasn’t killed by normal banking problems.
It was killed by concentration risk:
Crypto boom → deposits flood in → stock rises
Crypto crash → deposits flee → forced losses → liquidation → shareholders wiped out
Bottom line:
Depositors were safe.
Creditors mostly recovered.
Equity investors were nearly completely wiped out.