Ongoing investigations against crypto platform Coinbase have forced it to end its partnership with Silvergate Bank, it announced on Thursday.
In a tweet, it said: “In light of recent developments & out of an abundance of caution, Coinbase is no longer accepting or initiating payments to or from Silvergate.“
Coinbase also stated it would facilitate institutional client cash transactions with banking partners. It had also taken proactive action to “help ensure that clients experience no impact” from the measures.
Coinbases primary banking partner is now Signature Bank.
According to Coinbase: “The vast majority of Coinbase client cash is stored in FDIC-insured bank accounts. When a client has a large dollar balance, Coinbase stores their cash in a U.S. government money market fund to keep it safe and liquid.”
It added: “[We] hold client cash 1:1 and your assets are your assets. We do not lend or take any action with your assets unless you specifically instruct us to.”
Silvergate-FTX Ties
The insolvent bank’s stocks plummeted an additional 40 percent in premarket trading, reports revealed. JP Morgan also downgraded the bank from “underweight” to “neutral.”
The bank also failed to file its 10-K report in a timely manner and has requested an additional two weeks to complete it. Authorities such as the US Securities and Exchange Commission require the document to assess a company’s financial standing.
The news comese after the bank after now-defunct cryptocurrency platform FTX collapsed on 11 November and filed for Chapter 11 bankruptcy.
Its toubles intensified after the US Department of Justice (US DoJ) launched investigations due to Silvergate’s ties to FTX, primarily linked to disgraced former chief executive Sam Bankman-Fried, who owned an account with the institution.
Silvergate and its CEO Alan Lane currently face a class-action lawsuit in California courts. Authorities aim to penalise the bank for allegedly facilitating illegal money deposits amid a massive bank run, triggered by FTX’s huge liquidity crunch last year.
