Crypto Biz: Silvergate shutting down, Alameda suing Grayscale

With the Bitcoin (BTC) halving more than a year away, don’t expect crypto industry narratives to change anytime soon. Nay, crypto winter is still in full force, and the nasty headlines show no signs of abating.

This week, Silvergate Bank’s parent company announced it would shut down and liquidate the crypto bank “in light of recent industry and regulatory developments.” This hardly comes as a surprise after most of Silvergate’s high-profile partners abandoned the company when the regulators came knocking.

The latest Crypto Biz newsletter documents the voluntary liquidation of Silvergate, a new lawsuit from Alameda Research targeting the Digital Currency Group (DCG), and “stale” Tether allegations from The Wall Street Journal.

Silvergate Capital Corporation will ‘voluntarily liquidate’ Silvergate Bank

After months of uncertainty, Silvergate Bank’s parent company announced on March 8 that it would unwind its operations and liquidate its remaining assets. While this marked another blow to the crypto industry, the writing was already on the wall for Silvergate Bank. According to reports, Silvergate Bank had been negotiating with the Federal Deposit Insurance Corporation (FDIC) to avoid a shutdown. Apparently, those talks went nowhere. Like other crypto firms, Silvergate’s troubles began with the meltdown of FTX and ended with regulators investigating the bank’s alleged involvement in Sam Bankman-Fried’s doomed empire. By the time Silvergate went under, companies like Coinbase, Paxos, Gemini, Galaxy Digital and BitStamp had already cut ties.

Alameda Research files suit against Grayscale over ‘self-imposed redemption ban’

Here’s a headline you probably weren’t expecting: Bankrupt Alameda Research is suing Grayscale Investments and its owner, the Digital Currency Group, for its exorbitant fees and refusal to unlock shareholder redemptions. The lawsuit, filed in Delaware, alleges that Grayscale charged over $1.3 billion in management fees, supposedly violating trust agreements. The company also “contrived excuses” to prevent shareholders from redeeming their shares. The lawsuit seeks to “unlock $9 billion or more in value for shareholders of the Grayscale Bitcoin and Ethereum Trusts […] and realize over a quarter billion dollars in asset value for the FTX Debtors’ customers and creditors.” These sorts of allegations against DCG and Grayscale are nothing new. In January, Bitcoin billionaire Cameron Winklevoss accused DCG CEO Barry Silbert of orchestrating “a carefully crafted campaign of lies” to hide a hole in an associated company’s balance sheet.

1/ FTX CEO John Ray enters the ring.

FTX filed a lawsuit against Grayscale and its parent company.

This is a surprise.

John Ray is turning over every rock - including legal challenges to Grayscale's model - to maximize recoveries for FTX creditors.https://t.co/x1xl89B0cP

— Ram Ahluwalia, crypto CFA (@ramahluwalia) March 6, 2023

Bitcoin ASIC manufacturer Canaan saw 82% revenue drop in Q4

In another sign of the times, Chinese Bitcoin miner and manufacturer Canaan reported a massive drop in revenue during the fourth quarter. The company’s sales plummeted 82.1% year-over-year to $56.8 million. During the quarter, Canaan sold 1.9 million terahashes per second worth of computer power for Bitcoin miners, down 75.8% compared to a year ago. Regarding profitability, Canaan was deeply in the red for the quarter — reporting a loss of $63.6 million. Overall, Canaan appears healthy enough to withstand a crypto winter that could last for the rest of the year. The company currently has $706 million in total assets against $67 million in liabilities.

Tether strikes at WSJ over ‘stale allegations’ of faked documents for bank accounts

Here’s how you know the bear market isn’t over: Mainstream media’s attacks against stablecoin issuer Tether show no signs of letting up. If you’ve been in crypto long enough, you know that Tether is the industry’s favorite conspiracy theory because people love to doubt the company’s collateral, the make-up of its reserve holdings and its association with crypto exchange Bitfinex. This week, a familiar Tether foe alleged that the stablecoin issuer faked documents and used shell companies to access the banking system. According to The Wall Street Journal, Tether and Bitfinex faked sales invoices and transactions as part of a ploy to open bank accounts. On the same day the report was released, Tether fired back, claiming the story was based on “stale allegations from long ago,” and “wholly inaccurate and misleading.”

I'm at the PlanB anniversary in #lugano
So much energy and people excited to talk about #Bitcoin
While I was on on stage I heard some clown honks, pretty sure was WSJ.
As always ton of misinformation and inaccuracies. Poor guys, must be difficult be them but need better media.

— Paolo Ardoino (@paoloardoino) March 3, 2023

Before you go: How will the Silvergate implosion impact crypto?

The fallout from the FTX collapse continues to impact crypto markets. Now, crypto-friendly lender Silvergate Bank is on the brink of insolvency after reporting a $1 billion net loss in the fourth quarter. That’s not the worst of it, though. Several major crypto companies, including Coinbase, Circle, Paxos, Galaxy Digital, MicroStrategy and Tether, have distanced themselves from the company as the United States Department of Justice investigates its involvement in the FTX debacle. On this week’s Market Report, I sat down with fellow analysts Marcel Pechman and Joe Hall to discuss how Silvergate could impact crypto sentiment. You can watch the full replay below.