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tags: [analyst/dirty-media-bubble, potential/short, result/winner] ...
Dirty Media Bubble has published on Signature Bank, which they allege is similar to Silvergate Bank. See below for an extract from their website. (H/T Edwin Dorsey, AKA The Bear Cave.)
The crypto-friendly Silvergate Bank (SI) has had a rough couple of months. Ever since it was revealed that Silvergate was doing a lot of business with the now-disgraced crypto mogul Sam Bankman-Fried, investors and customers have grown wary of certain heretofore unappreciated risks of working with cryptocurrency businesses. Silvergate shed 68% of their total deposits, some $8.1 billion, in this quarter according to preliminary reports. Their need for cash forced them to sell debt instruments early, reportedly leading to a loss of some $718 million.
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$SI performance over last 6 months
Silvergate’s financial woes are matched by its legal concerns. It was discovered that Silvergate was allowing Alameda Research to receive customer deposits that were supposed to be going to the FTX exchange. In addition to new attention from regulators, Silvergate faces a class action lawsuit from FTX victims alleging that the bank was complicit in the FTX fraud.
While Silvergate has received most of the public wrath for its role in this fraud, another crypto-friendly bank has avoided much attention from the media: Signature Bank of New York (SBNY). Silvergate and Signature have unique relationships with the cryptocurrency industry. Both companies created their own private blockchains, the Silvergate Exchange Network (SEN) vs. SBNY’s Signet, to service their crypto clients by providing 24/7/365 dollar transfer services. These services have been wildly popular, with each firm performing hundreds of billions of dollars in transaction volume each quarter:
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From hyperlinked article above
Both banks provide depository services for crypto exchanges, funds, and stablecoins. Signature is one of the major holders for the deposits backing the major stablecoin USDC as well as banking dozens of other major crypto firms.
Signature has downplayed its exposure to the collapse of FTX by specifying that they never made loans to the defunct exchange, only that they had a “deposit relationship.” They have also announced they are going to try and sell off up to $10 billion of their crypto related deposits. This announcement seems to have anticipated a joint warning from the FIDC, OCC, and Federal Reserve about banking for crypto companies.
The lack of attention on Signature may be about to change. Signature faces significant and obvious risks from holding large deposits for crypto entities at risk of sudden and massive withdrawal pressures. As seen with SI’s preliminary Q4 results, these withdrawal pressures can be severe and lead to massive losses for the bank when it needs to come up with the money. However, crypto bank runs are not the only risk Signature faces in the coming months. According to recent revelations, Signature may face significant legal and regulatory consequences from doing business in the fast and loose world of cryptocurrency.