The FTX-saga created a tsunami that affected the whole industry, and aftereffects were also visible in other sectors. All the accomplices of the case are being questioned and charged accordingly. Crypto bank Silvergate, which held multiple accounts of FTX and Alameda Research, is being probed by the US Department of Justice (DoJ) fraud unit for their close involvement in the case.

The Probe

The crypto-focused bank hosted some accounts linked to Ex-CEO of FTX Sam Bankman-Fried’s businesses, the now-bankrupt crypto exchange Alameda, and other entities. Citing “people familiar with the matter”, a report filed by Bloomberg shed light on the incident. However, the California-based bank is not accused of the crime but is only being investigated to fathom the depth of the deceit. 

When FTX collapsed and filed for chapter 11 bankruptcy on November 11, 2022, Silvergate was heavily impacted, reporting to have lost $1 billion in the last quarter. Due to this, the bank had to shed 40% of its staff and disclose taking out billions of dollars in loans to avoid a liquidity crunch following the fall of the crypto empire. Through the investigation, they are trying to determine if Silvergate or any other entity working with FTX had prior knowledge of the deceit. 

Silvergate said Alameda opened an account with them in 2018, sometime before the FTX launch. It is claiming to have performed due diligence and ongoing monitoring at the time. A bank representative said the firm “has a comprehensive compliance and risk management program.”

Implication

Josh Rager, a crypto trader, commented on the possible implication of this latest criminal investigation on all the crypto exchanges having ties with the crypto bank Silvergate. 

January 27, 2023, Silvergate ceased its dividends, referring to the ongoing volatility in the digital asset industry. However, maintaining that their cash position is in excess at the time for the digital assets customer-related deposits.

Impact on Stock Price

Due to their involvement with FTX, SI prices are down by 92% from the all-time high achieved in November 2021. At the time of writing, the stock was trading at $20.97, with a jump of 29.13%, with the previous close at $16.24 while opening at $19.40. The fifty-two-week range is from $10.81 to $162.65, meaning that the current price is closer to the lower end of the spectrum.

An estimated price target is to be at $36.18, which is a 72.5% upside; the highest rate could be $150.00, while the lowest rate could be $13.00. The projected earnings growth is around 55.32% from $0.47 to $0.73 per share. Per market sentiment, the short interest is bearish, with nearly 62% of shares sold short. 

Nancy J. Allen

Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.