Coppola Comment

Silvergate Bank died yesterday. Its parent, Silvergate Capital Corporation, posted an obituary notice   (click for larger image): Silvergate Bank bled to death after announcing significant delay to its 10-K full-year accounts and warning that it might not be able to continue as a going concern. We will never know whether it could have recovered from the bank run after the failure of FTX. The bank run after the announcement was far, far worse. The exit of its major crypto customers sealed Silvergate's fate.  But the agent of death was a government agency. On 7th March, Bloomberg reported that Silvergate Bank had been in talks with FDIC about a potential resolution "since last week". Many of us had expected FDIC to go into the bank last Friday with a view to resolving it over the weekend. We now know that FDIC did indeed go into the bank, but a resolution over the weekend wasn't possible. Presumably, this means there was no buyer.  Why do I say there was no buyer? Beca...

This is the story of a bank that put all its eggs into an emerging digital basket, believing that providing non-interest-bearing deposit and payment services to crypto exchanges and platforms would be a nice little earner, while completely failing to understand the extraordinary risks involved with such a venture.  On 1st March, Silvergate Capital Corporation announced that filing of its audited full-year accounts would be significantly delayed , and warned that its financial position had materially changed for the worse since the publication of its provisional results on January 17th, when it reported a full-year loss of nearly $1bn. The stock price promptly tanked, falling 60% during the day:   Platforms, exchanges and other banks halted or re-routed transactions on Silvergate's SEN payments network, and customers that had other banking relationships removed their deposits. In response, Silvergate halted the SEN network. A banner on its website now reads: Effective i...

Yesterday, the SEC issued a Wells notice to the stablecoin issuer Paxos , warning it that the SEC intended to take legal action against it for issuing an unregistered security. The security in question is the fully-reserved stablecoin BUSD (Binance USD), which Paxos issues expressly for use on the Binance crypto exchange. The Wells notice doesn't apply to Paxos's other fully-reserved stablecoin, USDP, which it issues for use on its own platform.  A few hours later, the New York Department of Financial Services (NY DFS) ordered Paxos to stop minting BUSD. In a consumer alert published on its website, the NY DFS said there were "several unresolved issues related to Paxos’ oversight of its relationship with Binance in regard to Paxos-issued BUSD." It didn't specify what these issues were, but it went on to clarify that Paxos's BUSD and Binance's coin of the same name are not the same thing, and that it only regulates Paxos's coin, not Binance's: ...

Celsius Network was never a real business. It did not have a viable business model. Really, it was a momentum trading scheme that relied on the premise that crypto prices would always rise. And when they didn't, it resorted to fake valuations and market manipulation to escape insolvency. It was fraudulent from the start.   This is the conclusion I've reached after studying the U.S. Examiner's final report (yes, I've read all 476 pages of it) and Celsius's audited reports and accounts up to 31st December 2020.  There are no more recent audited accounts. It was due to file its 2021 accounts by 31st December 2022, but it did not do so. The accounts are now significantly overdue. I doubt if they will ever be filed.  The U.S. Examiner's report reveals deep and long-lasting insolvency, concealed by layer on layer of fraud. Whether Alex Mashinsky, Celsius's founder, owner and CEO, knew that the devices he used to conceal the company's insolvency were fraudulen...

  It's been evident for some years now that those selling risky crypto products to risk-averse investors like to have federal branding on their snake oil. Tether claimed to have 100% actual dollar backing for its stablecoin. Various exchanges and platforms claimed that customer deposits were FDIC insured. The New York Attorney General showed that Tether didn't have 100% dollar backing or anything like it. And now the FDIC has sent cease & desist orders to  FTX , Voyager and several other crypto companies , it has become dangerous even to mention FDIC insurance in marketing material.  But that doesn't meant they've given up on the quest for a credible claim to Federal backing. The new Holy Grail is gaining access to Federal Reserve funding without becoming a licensed bank. Accordingt to analysts at Barclays, Circle, the issuer of the USDC stablecoin widely regarded in crypto markets as a "safe" dollar equivalent, may have found a way:  This screenshot com...