According to a report by the Federal Reserve Board's Office of Inspector General, Silvergate Bank collapsed due to its over-reliance on risky crypto deposits and ineffective management caused by nepotism. The bank's change in strategy to focus on customers engaged in crypto activities in 2013 led to its concentration in the crypto industry, rapid growth, and multilayered funding risks.
The bank grew to become essentially a single-industry lender, with the vast majority of its customer deposits being uninsured and non-interest bearing. Government supervisors failed to pressure the bank to establish new risk protection measures, and nepotism among the bank's senior management undermined its risk management function. The bank voluntarily wound down in March 2023.