On January 4, a federal judge ordered FTX Digital Markets to turn over funds stashed in accounts of investment bank Silvergate. In a court filing, Silvergate Bank reported that a US federal judge had ordered the seizure of $93 million owned by FTX Digital Markets.
According to court documents, Silvergate was instructed to move funds related to FTX “to ensure the safety” of the assets by Bahamian liquidators who had previously filed for bankruptcy in New York. Silvergate disclosed that FTX’s accounts had already been seized, rendering the Bahamian request meaningless.
The island nation is also involved in FTX’s downfall. Even before declaring bankruptcy, FTX sought to blame Bahamian officials for permitting certain withdrawals while most clients were prevented from accessing their assets. The authorities shot down that allegation.
Meanwhile, on the same day, US authorities informed the court at a bankruptcy hearing that they were attempting to seize Robinhood shares connected to FTX. According to reports, they are primarily interested in shares pledged as loan security by Alameda Research. Sam Bankman-Fried, reportedly owned around 56 million shares of the online broker, valued at about $450 million.
FTX sparks bank run
Furthermore, customers withdrew an estimated $8.1 billion in digital asset deposits from the bank during the fourth quarter, prompting the bank to sell securities and related derivatives at a loss of $718 million, as reported by the bank on Thursday. With FTX collapsing, Silvergate was thrust into a crisis that led to the bank run.
“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows,” Chief Executive Officer Alan Lane said in the statement, adding, “we currently maintain a cash position in excess of our digital asset related deposits.”
Following these reports, Silvergate stocks fell 44% to $12.34 on the New York stock exchange, the lowest price since November 2019.
