Veteran Short Seller Targets Silvergate Bank Over Ties to Crypto Giants
On Friday afternoon, veteran short seller Marc Cohodes took to Twitter to share pictures of an apparently empty Silvergate office, suggesting that the publicly traded bank was a "crime scene" and CEO Alan Lane deserved imprisonment.
The California-based bank has recently come under significant scrutiny due to its ties to cryptocurrency exchange giant FTX and its sister hedge fund, Alameda Research. This has resulted in a steep decline in shares, with the company’s stock down around 95% over the past six months.
Moody’s downgraded the bank’s long-term issuer rating on Friday, citing poor capitalization and the late filing of annual reports. The bank’s failure to disclose bad news and alleged share manipulation by management have further fueled concerns among investors.
Cohodes had been warning investors about Silvergate since November when he first labeled the bank a “dogshit” company in a video interview with market analysis site Hedgeye. He accused the bank of being a cover for money laundering and drew parallels with German money lender Wirecard, which collapsed amid massive fraud allegations in 2020.
Cohodes, who made money shorting Wirecard, believes that FTX’s reliance on Silvergate warrants further scrutiny. He cited a quote from FTX co-founder Sam Bankman-Fried that once appeared on the Silvergate website: “Life as a crypto firm can be divided up into before Silvergate and after Silvergate.”
The bank’s ties to FTX and Alameda Research have resulted in multiple investigations and lawsuits. One class-action lawsuit accuses Silvergate of mishandling funds belonging to FTX customers and having “plain sight” of crimes being committed at the exchange and hedge fund.
Despite the company’s troubles, Cohodes believes that Silvergate’s management failed to disclose bad news about the firm when they first learned of it, and that someone is manipulating the shares. He continues to short the stock and has suggested that he may file his own lawsuits against the bank.
Given the ongoing investigations and lawsuits, Cohodes suggested that the bank may not survive much longer. “I would be very surprised if the bank is open next week,” he said.
— Marc Cohodes (@AlderLaneEggs) March 3, 2023