Crypto-friendly Silvergate Bank ultimately collapsed this year due to over-dependence on risky crypto deposits and nepotism that led to ineffective management, according to inspectors at the Federal Reserve.
In a Sept. 27 executive summary of its review into the collapse of Silvergate Bank, the Federal Reserve Board’s Office of Inspector General pointed the finger at Silvergate’s change in strategy to focus on “customers engaged in crypto activities” in 2013.
“Silvergate’s concentration in crypto industry deposit customers, rapid growth, and multilayered funding risks led to the bank’s voluntary liquidation.”
Evolving from a little-known institution in the early 2010s, Silvergate expanded rapidly to become the premier bank for crypto clients, growing from $1 billion in deposits in 2017, to $16 billion by 2021.
During this period of rapid growth, the Fed said the bank grew to become essentially a single-industry lender, with the vast majority of its customer deposits being uninsured and non-interest bearing.
If the institution had been properly following existing banking regulations, it should have filed a new application with the Fed, but government supervisors failed to pressure it to establish new risk protection measures.
While some government supervisors had voiced their concerns with the bank’s activities, the Fed said these should have been escalated through “stronger, earlier, and more decisive supervisory action.”
Silvergate’s purported wrong-doings weren’t just limited to crypto. Investigators also claimed that nepotism plagued the banks’ senior management, leading to an incompetent and ineffective corporate structure that failed to address the many risks present at the time.
“Further, nepotism, evidenced in the several familial relationships among members of the bank’s senior leadership team, undermined the effectiveness of the bank’s risk management function.”
“Silvergate’s board of directors and senior management were ineffective, and the bank’s corporate governance and risk management capabilities did not keep pace with the bank’s rapid growth, increasing complexity and evolving risk profile,” concluded the report.
The bank voluntarily wound down in March 2023, meaning that the bank didn’t technically fail. This meant that the government did not have to step in and force it to pay back depositors.
Canterbury MP Rosie Duffield has resigned from the Labour Party.
The 53-year-old MP is the first to jump ship since the general election and in her resignation letter criticised the prime minister for accepting thousands of pounds worth of gifts.
She told Sir Keir Starmer the reason for leaving now is “the programme of policies you seem determined to stick to”, despite their unpopularity with the electorate and MPs.
In her letter she accused the prime minister and his top team of “sleaze, nepotism and apparent avarice” which are “off the scale”.
“I’m so ashamed of what you and your inner circle have done to tarnish and humiliate our once proud party,” she said.
Since December 2019, the prime minister received £107,145 in gifts, benefits, and hospitality – a specific category in parliament’s register of MPs’ interests.
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Ms Duffield, who has previously clashed with the prime minister on gender issues, attacked the government for pursuing “cruel and unnecessary” policies as she resigned the Labour whip.
She criticised the decision to keep the two-child benefit cap and means-test the winter fuel payment, and accused the prime minister of “hypocrisy” over his acceptance of free gifts from donors.
“Since the change of government in July, the revelations of hypocrisy have been staggering and increasingly outrageous,” she said.
“I cannot put into words how angry I and my colleagues are at your total lack of understanding about how you have made us all appear.”
Ms Duffield also mentioned the recent “treatment of Diane Abbott”, who said she thought she had been barred from standing by Labour ahead of the general election, before Sir Keir said she would be allowed to defend her Hackney North and Stoke Newington seat for the party.
Her relationship with the Labour leadership has long been strained and her decision to quit the party comes after seven other Labour MPs were suspended for rebelling by voting for a motion calling for the two-child benefit cap to be abolished.
“Someone with far-above-average wealth choosing to keep the Conservatives’ two-child limit to benefit payments which entrenches children in poverty, while inexplicably accepting expensive personal gifts of designer suits and glasses costing more than most of those people can grasp – this is entirely undeserving of holding the title of Labour prime minister,” she said.
Ms Duffield said she will continue to represent her constituents as an independent MP, “guided by my core Labour values”.