Tuesday, October 21, 2025

FTX Sinkhole: Is Silvergate Capital Next?

The FTX implosion seems to be a real-life television series with new guest each day on who it might potentially drag down with its road to bankruptcy.

On the next episode: California-based crypto firm Silvergate Capital (NYSE: SI).

The company on its website describes itself as “a Federal Reserve member bank and the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry.”

Last week, CEO Alan Lane revealed that the firm has “‘less than 10%’ of its $11.9 billion total deposits from all digital asset customers tied to FTX.”

“Silvergate has no outstanding loans to nor investments in FTX, and FTX is not a custodian for Silvergate’s bitcoin-collateralized SEN Leverage loans. To be clear, our relationship with FTX is limited to deposits,” Lane clarified.

Currently, FTX is in the process of filing for bankruptcy, where around one million creditors are expected to chase the liquidation. FTX founder Sam Bankman-Fried said in an interview that he has to raise $8 billion to cover for the obligations.

Since the implosion, he’s already stepped down from management and was replaced by Enron liquidator John J. Ray III as CEO–who reportedly was shocked upon seeing “a complete failure of corporate controls and such a complete absence of trustworthy financial information” in the crypto exchange.

Silvergate’s share price on the NYSE, however, bumped up a little following the announcement. However, it’s been on a downward trend ever since. It’s currently trading below the $30.00-mark, a level not seen since November 2020.

Just in the past 30 days, the firm lost around 60% of its valuation.

Short seller Marc Cohodes, who has taken a short position on Silvergate, sees more to the story than what Silvergate projects.

“It’s a deposit story, it’s not a loan story. If they lose all their depositors, there’s gonna be a run on the bank,” Cohodes said in an interview with online show Hedgeye.

While Silvergate maintains it has no loans in FTX, Cohodes highlighted that the crypto bank was endorsed by Bankman-Fried.

“It’s crazy… and they put this thing out that saying [FTX exposure is] only a billion dollars of deposits. If there’s a run on the bank and the US government wakes up… and started kicking the tires of this bank, they’re gonna realize they have no know-your-customer [process] on right now or they have no anti-money laundering on right now. Because FTX is a criminal operation, cut and dry,” Cohodes explained.

“If they are doing all these businesses for FTX–look at what happened to all the banks that did business with Madoff… It’s serious as sh*t,” he added.

Beyond FTX, Cohodes also pointed out that Silvergate transferred $1 trillion “between offshore entities and customers,” against a $14 billion deposit base.

He also highlighted that the crypto bank’s former chief risk officer, Tyler Pearson, is the son-in-law of Lane. On its website, Silvergate now lists Kathleen Fraher holding the position.

Cohodes also posted what seems to be a copy of wire instructions transferring money to FTX’s sister hedge fund Alameda–whom Bankman-Fried confirmed FTX lent money to using customer deposits. Silvergate Bank is listed as the receiving bank in the instructions.

Countering Cohodes’s argument, a trader named Kashyap Sriram outlined why he thinks Silvergate will not experience a bank run, highlighting that Silvergate Exchange Network (SEN) loans are just $302.2 million of the whole asset base and are “collateralized with bitcoin or USD.”

“At September 30, 2022 the BTC serving as collateral for the bank’s SEN Leverage loans amounted to $769.9 mil. The Bank’s high and low daily collateral values related to such lending during the nine months ended September 30 amounted to $1.6 bil and $314.6 mil, respectively,” Sriram quoted Silvergate’s SEC filing. Basing on this, the trader concluded that “even at the lowest point, the loans were over-collateralized.”

FTX’s implosion has dragged some of the biggest names in the crypto industry. Most recently, Genesis Global’s lending arm announced that it is temporarily freezing redemptions and new loan originations after declaring it has around $175 million locked in FTX. 

Earlier this week, Ikigai Asset Management and BlockFi each revealed their exposure to FTX, resulting in the firms halting their respective withdrawals. In its Q3 2022 report, Galaxy Digital reportedly had around $76.8 million in cash and digital assets invested in the embattled crypto exchange, around $47.5 million of which is in the process of being withdrawn.


Information for this briefing was found via Coindesk and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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