The Federal Reserve Board and California Department of Financial Protection and Innovation are keeping close tabs on
In a joint enforcement action, the Fed and DFPI issued a consent order last week requiring the La Jolla, Calif.-based bank to share a self-liquidation plan with both state and federal regulators within 10 days. It also forbade the bank from destroying records and noted that bank officials must cooperate fully with an
Consent orders from the Fed function like legal settlements. Institutions agree to a set of conditions and waive their right to challenge them. The document was made public Thursday morning.
As part of the order, Silvergate agreed to make good on its promise to ensure all of its depositors are made whole. It also agreed not to expand its business activities during its wind-down, pay dividends, repurchase stock or make payments on subordinated debt without written approval from its supervisors.
Silvergate is also barred from using cash assets to make any unplanned executive compensation payments or severance payouts without regulators' approval. Similarly, any employee promotion during the wind-down period will need to be approved by supervisors as well. Limits will also be placed on "golden parachute" payments.
The bank is also prohibited from
As part of the agreement, Silvergate will provide quarterly written progress reports to supervisors on the execution of its liquidation plan, including its monetization of loans and securities and its recovery of other assets.
The order also requires Silvergate to provide "substantial assistance" to the Fed and the California Department of Financial Protection and Innovation in their ongoing investigation into the bank's dealings with FTX. This includes making "present or former officers, directors, employees, agents, and consultants" available for interviews or testimony. The bank must also identify witnesses with "material information" about the matters under investigation.
The order does not disclose the scope of the investigation, but the FTX organization and its leaders face a battery of charges including fraud, conspiracy and bribery. Before its collapse, FTX was the second-largest crypto exchange in the world.
Prior to its voluntary liquidation in March, Silvergate's business model centered on providing banking services to crypto currency firms. Its Silvergate Exchange Network served as a near-real-time payment network for corporate customers to trade digital assets and convert holdings into U.S. dollars.
Late last year, Silvergate experienced a
Silvergate's decision to shut down coincided with — and ultimately upended — an
