Silvergate’s Problem Debts Were Its Deposits: Paul J. Davies

If Silvergate Capital Corp. fails, it might be the first bank to be brought down by bad liabilities rather than bad assets.

The California-based bank warned in a filing last week that it might not be able to stay in business, which heightened depositors’ rush to move their money elsewhere. Normally, a run on a financial institution is sparked by fears that it has made loans so terrible that the losses would eat into its customers’ savings. It’s a different story at Silvergate.

For anyone unfamiliar, this bank has been on a wild ride. It became known as the bank for crypto traders and ...