Carter Exposes Fed's Role in Silvergate's Collapse

Crypto evangelist Nic Carter recently exposed how the Federal Reserve has played a crucial role in pushing the crypto-friendly Silvergate Bank to bankruptcy. He added that as part of Operation Choke Point 2.0, Biden's regulators—the Fed, FDIC, and OCC—systematically cracked down on banks serving the crypto space.

Operation Choke Point 2.0

In early 2023, the Biden administration's top financial regulators launched a coordinated attack on crypto-friendly banks Silvergate and Signature as part of 'Operation Choke Point 2.0'.

Carter provides key details of how this led to Silvergate Bank's forceful collapse. Amid mounting regulatory pressure, Silvergate Bank filed for Chapter 11 bankruptcy earlier this week.

Carter rejects all previous reports that the bank fell due to market losses and exposure to FTX. He said that despite facing significant redemptions following the FTX collapse, the bank remained solvent. In July, an ex-FTX official blamed Silvergate Bank for the exchange's questionable transactions.

Fed's Directive: The Final Blow

However, Carter noted that the Fed's directives to drastically reduce the crypto-related deposits to less than 15% of its business ultimately led to its demise.

Carter noted that initially, he thought the FDIC was choking the bank. However, it turns out that the Fed was passing the guidance behind the curtains. 'One point I've endeavored to make is that Silvergate died by murder, not suicide,' writes Carter.

Testimony from Silvergate

As part of the Chapter 11 bankruptcy proceedings declaration, Former Silvergate executive Elaine Hetric corroborated Nic Carter's observations.

She confirmed that while Silvergate survived the market downturn, the regulatory mandate to reduce its crypto exposure forced the bank to shut down.

Besides, Hetric's affidavit also points out broader regulatory efforts, including excluding crypto-related business lines from bank acquisitions. This further confirms Carter's claims that Silvergate was ' killed by design under Operation Choke Point 2.0.

Legal and Industry Reactions

Carter wrote: 'What the Biden admin is doing is illegal. Cooper and Kirk, the law firm that sued over OCP 1.0 under Obama, has pointed out that OCP 2.0 violates the Fifth Amendment.'

Coinbase CLO Paul Grewal took this opportunity to call out the regulators for their high-handedness in crypto regulations.44

'That's what the public deserves to see for itself and why we are pursuing our FOIA suit,' he said. He challenged SEC's 'crypto asset security' claims before a critical House Financial Services Committee hearing.