Mike Lempres on Silvergate’s Collapse, Bank Regulation, and Debanking (EP.593)

Feb 5, 2025

Mike Lempres, former Chairman of Silvergate Bank and a seasoned expert in banking regulation, dives deep into the collapse of the crypto-focused bank. He shares insights about the bank's growth and the significance of the Silvergate Exchange Network. Lempres reveals how Silvergate faced a devastating bank run following the FTX fallout and examines the implications of regulatory pressures that led to its liquidation. He also discusses the complex relationship between banks and crypto, exploring regulatory overreach and the future of debanking.

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ANECDOTE

Mike Lempres's Career Path

Mike Lempres's career started in the Department of Justice, then transitioned to law and became general counsel of the Pacific Coast Stock Exchange.
He later became an assistant U.S. attorney before joining Silvergate Bank as a lawyer and discovering crypto.

INSIGHT

Banks' Influence in Crypto

Banks had the power to choose winners and losers in the crypto space through selective banking practices.
This selection process appeared more arbitrary than scientific.

INSIGHT

Silvergate's Crypto Concentration

By late 2022, almost all of Silvergate's depository base was crypto-related, exceeding even Signature Bank's proportion.
This high concentration made them particularly vulnerable to industry fluctuations.

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Former Chairman of Silvergate Bank Mike Lempres joins us for a discussion of Silvergate, the crypto-focused bank that was forced into liquidation in early 2023 following a bank run. This are the first on the record comments from any Silvergate executive following the voluntary liquidation announced in March 2023. In this episode:

Mike’s background at the DoJ, at Coinbase, and how he came to be chairman of the board at Silvergate
How Silvergate grew to become the premier crypto-focused bank with $14b in deposits
Why the Silvergate Exchange Network (SEN) was so useful to the crypto space
How Silvergate suffered a bank run and ultimate liquidation following the FTX collapse
How Silvergate survived a 70% bank run
Regulatory shifts in 2023
What led the decision to voluntarily liquidate
What has happened at Silvergate since the announcement of the liquidation?
The effect of Elizabeth Warren’s letters and short seller behavior on the collapse
Could Silvergate have survived and thrived?
Should bank regulators be allowed to ringfence entire industries?
Silvergate’s relationship with Alameda/FTX - and could they have detected the fraud?
Was Silvergate a victim of FTX
How the Signature case adds to the suspicion - were regulators sending a message?
What was the issue with SEN monitoring?
Silvergate’s settlements with the Fed, the SEC, and the CA DFP
How Silvergate was rugpulled by the government with regards to Diem
The Fed’s recent evolution on the topic of banks serving crypto
Mike’s outlook on crypto banking and the domestic crypto industry
Why Signature and Silvergate executives are limited in what they can say publicly
The problem with “confidential supervisory information”
Why we may not get a “smoking gun memo” from the regulators on Choke Point 2.0
What changes would Mike make to bank regulation in the US?
Lingering misconceptions about Silvergate
Do Silvergate shareholders have a legal case against the government?