Silvergate Bank Bankruptcy: How Fed’s Operation Choke Point 2.0 Collapsed Crypto Banking

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As an analyst with over two decades of experience in the financial industry, I find it alarming to witness how regulatory actions can potentially stifle innovation and competition. The case of Silvergate Bank under Biden’s Operation Choke Point 2.0 is a stark reminder of this reality.

Crypto expert Nic Carter has recently revealed that the Federal Reserve has significantly contributed to Silvergate Bank’s bankruptcy by exerting pressure. He further stated that under Operation Choke Point 2.0, regulators from the Fed, FDIC, and OCC, led by President Biden, have been actively restricting banks involved in the crypto sector.

How Fed’s Operation Choke Point 2.0 Impacted Silvergate Bank

In early 2023, high-ranking financial regulators under the Biden administration collectively targeted crypto-friendly banks Silvergate and Signature as part of an updated version of “Operation Choke Point 2.0”. A cryptocurrency advocate outlines essential aspects showing how this action eventually led to a dramatic downfall of Silvergate Bank.

Under increasing scrutiny from regulators, Silvergate Bank recently declared Chapter 11 bankruptcy. However, Carter denies all past speculations suggesting that the bank’s downfall was due to market losses or FTX exposure. He asserts that even after experiencing substantial withdrawals following the demise of FTX, the bank remained financially stable. Previously, a former FTX employee had accused Silvergate Bank of enabling dubious transactions for the exchange in July.

According to Carter’s argument, the Federal Reserve’s instructions to lower crypto-related deposits in the bank below 15% of its total business significantly contributed to its collapse. Initially, Carter believed that the FDIC was strangling the bank, but it appears now that the Fed was secretly implementing these measures. In essence, Carter claims that Silvergate did not commit suicide, but was murdered instead, as he puts it in his writing.

Former Executive Confirms the Regulatory Crackdown

In the course of Chapter 11 bankruptcy filings, Elaine Hetric, a former executive at Silvergate, has validated Nic Carter’s insights. She affirmed that although Silvergate managed to weather the market decline, the regulatory requirement to minimize its cryptocurrency holdings led the bank to close operations.

Additionally, Hetric’s affidavit highlights wider regulatory initiatives, such as barring cryptocurrency-related business segments from bank mergers and acquisitions. This additional evidence supports Carter’s assertion that Silvergate was deliberately targeted in Operation Choke Point 2.0, effectively leading to its demise. In his own words, Carter stated:

The actions of the Biden administration are clearly against the law, as highlighted by Cooper and Kirk, the law firm who previously sued over OCP 1.0 during the Obama era. They assert that OCP 2.0 infringes upon rights protected by the Fifth Amendment.

Paul Grewal, Coinbase’s Chief Legal Officer, seized this moment to criticize the regulators for their overbearing approach in crypto regulations. “It is important for the public to witness this themselves,” he stated, explaining why they are pursuing their Freedom of Information Act lawsuit. Additionally, he countered the Securities and Exchange Commission’s assertions about “crypto asset security” prior to a crucial House Financial Services Committee hearing.

As a dedicated analyst, I am tirelessly working to ensure transparency and accountability in our operations. The heightened scrutiny we are currently experiencing is not only justified but also vital for the public’s trust. This is the very reason we have initiated a Freedom of Information Act (FOIA) lawsuit.

— paulgrewal.eth (@iampaulgrewal) September 20, 2024

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2024-09-20 09:28