According to the most recent Short Interest Reporting dated February 9, the cryptocurrency bank Silvergate Capital Corp. is the second-most shorted company in the United States, with nearly 72.5% of its shares being shorted. This information was gathered from the market on February 9.
The Financial Industry Regulatory Authority (FINRA) is responsible for the collection and publication of short interest positions for all equity securities twice per month. When investors and traders take a short position, it indicates that they anticipate a price decline for a particular asset, such as a share of stock. A short seller is someone who bets that the price of a securities will go down.
At the time of this writing, Silvergate stock (SI) had dropped by more than 87% during the course of the previous year. The latest financial report for Silvergate, as well as the legal fights the business is now engaged in about its ties with the defunct companies FTX and Alameda Research, have contributed to the pessimistic outlook on the stock.
The bank made the announcement on January 17 that the common shareholders would be responsible for a net loss of one billion dollars in the fourth quarter of 2022. According to a report published by the United States Securities and Exchange Commission (SEC), Silvergate experienced significant withdrawals of deposits during the period. As a result, the company was compelled to seek funding from wholesale sources and sell debt securities in order to keep its liquidity.
It has been claimed that Silvergate obtained a loan of $3.6 billion from the Federal Home Loan Banks System in the United States in order to minimize the consequences of a spike in withdrawals that occurred after the closure of the cryptocurrency exchange FTX in November.
The bank is being investigated and sued in the United States for allegedly providing assistance to FTX in its fraudulent operations, which include lending to users and commingling their cash. The corporation is being accused of “furthering FTX’s investment scam,” and stockholders are asserting that Silvergate violated the 1934 Securities Exchange Act. An examination of the bank’s involvement in FTX enterprises is now being carried out by the Justice Department.
According to Silvergate, Alameda signed up for a banking relationship with the institution in 2018, which was before to the release of FTX. According to the company’s statements, proper due diligence was performed at the time and continued monitoring of the issue was also performed.
Recently, in response to the issue at the bank, Moody’s Investors Service downgraded the ratings of Silvergate Capital and its bank to “junk,” with a negative outlook for both entities.