Silvergate Collapse: Did Warren and Biden Push the Bank to Fail?

• Senator Warren forced the liquidation of Silvergate, a report claims. 
• An unofficial mandate capped Silvergate’s crypto deposits at 15 percent.
• Warren pressured FHLB to not renew its loan agreement with Silvergate.

The crypto industry saw the downfall of several crypto-friendly banks last year and according to a report from Pirate Wires , Massachusetts Senator and member of the Senate Banking Committee, Elizabeth Warren, and the broader Joe Biden administration played a role in the collapse of Silvergate Bank.

Silvergate Bank filed for bankruptcy last week and the report authored by Nic Carter detailed how the firm was wronged by the Biden administration, citing new bankruptcy documents and interviews with unnamed individuals as sources. According to the report, had Silvergate not been forced to liquidate, it could have survived the 2022 crypto market crash .

Verbal Mandates and Regulatory Pressure on Crypto Deposits

The report stated that a directive was given to Silvergate to limit its crypto deposits to 15%, which “made the business model unsustainable.” Although there was no formal documentation for this instruction, the bank still complied due to pressure from agencies like the FDIC, along with Senator Warren’s influence.

It is important to note that during Silvergate’s collapse, which triggered the fall of Signature Bank, Silicon Valley Bank, and First Republic Bank, the Federal Reserve, the FDIC, and the OCC issued a joint statement about the risks facing banks with exposure to digital assets.

On the other hand, Warren wrote two letters to Silvergate’s CEO Alan Lane in December 2022 and January 2023, suggesting that the bank might face criminal liability due to its relationship with FTX. This further pressured the bank, forcing it to liquidate to settle its debts.

Warren’s Pressure Caused a Run on Silvergate

Following the collapse of the FTX exchange in 2022, Senator Warren’s letters raised concerns about Silvergate’s stability. The bank was already struggling with outflows and shrinking deposits during the crypto downturn.

Read also: Winklevoss: Warren’s Crypto Regulation Hurts 50 Million U.S. Investors

Despite the collapse of Luna, several crypto lending firms, and Three Arrows Capital (3AC), the report from Pirate Wires claims Silvergate could have recovered if Warren had not applied direct or indirect pressure on the firm.

Sources state that the FHLB (Federal Home Loan Banks) refused to renew its loan agreement with Silvergate after Warren allegedly persuaded them not to, accelerating the bank’s losses.