On Friday, veteran short seller Marc Cohodes celebrated his victory by posting pictures of an empty Silvergate office on Twitter. He also said, “[Silvergate] is a publicly traded crime scene, and Alan Lane belongs in prison.”
Shares of the California-based bank have taken a significant hit in recent months, declining around 95% over the past six months due to its ties to FTX and Alameda Research. On Friday, Moody’s downgraded the bank’s long-term issuer rating while also warning that further cuts were possible following the bank’s disclosure that it was poorly capitalized and had failed to file its annual report on time. In response, the bank announced the closure of its 24-hour money transfer system, the Silvergate Exchange Network.
Cohodes famously expressed his surprise at the potential of Silvergate Bank being open next week. The short seller is known for having a penchant for conflict and can often be challenging to deal with, even coming across as slightly crazy. This type of behavior is common among those who make money betting against companies, as it often leads to feelings of paranoia and conspiracy. Cohodes successfully shorted Wirecard, a German money lender that eventually collapsed due to fraud allegations in 2020, leading him to draw similarities between the two cases.
On November 14, Marc Cohodes alerted investors to the risk posed by Silvergate Bank. The warning was based on information provided to him by Porter Collins, co-founder of Seawolf Capital and renowned for calling the 2008 financial crisis ahead of time. During an interview with Hedgeye, an analysis site, Marc described Silvergate as being of “dogshit” quality and urged for it to be called out like FTX. Using the company’s stock code, he said, “I think SI is garbage, and they need to be called out just like FTX needs to be called out.”
Prior to his warnings about FTX, Cohodes had already spent several months scrutinizing the crypto exchange giant’s financials and found little that made sense. He was further spurred to action by the Wirecard scandal, which raised suspicions of shady businesses with massive offshore funds flows often used for money laundering. “So when you hear FTX talk about Silvergate and say they wouldn’t have a business without it, that’s when you need to start digging into Silvergate,” Cohodes declared.
Cohodes, in the November Hedgeye video, also told listeners that he was shorting the stock, meaning he would profit if the shares fell in price. He continues to short the stock, he said on Friday, and his position is bigger now than it was in November, as he expects the shares to collapse even more.
The Silvergate bank is now under multiple investigations and being sued by investors. One class-action lawsuit accused Silvergate of improperly handling money that belonged to FTX customers and of having ”plain sight” of crimes being committed at the exchange and sister hedge fund Alameda Research.
Cohodes revealed that he is likely to lodge a few complaints after the firm’s stock prices soared in recent weeks, causing him financial losses. He suspects management might have failed to inform shareholders about bad news when they first became aware of it and suggested that someone could be manipulating the shares. In response to Silvergate Exchange Network’s closure news, Cohodes tweeted: ”THERE WILL BE A CANNON FIRING … The SEN NETWORK has been SHUT FUCKING DOWN”, indicating his strong feelings about the matter
