Thread by @nic__carter

so many of you will remember my reporting around "operation choke point 2.0" from the spring of 2023; TLDR, Biden's financial regulators, namely the Fed, FDIC, and OCC launched a crackdown on banks covering the crypto space...

the first casualty was Silvergate bank, which _voluntarily liquidated_. the common reporting around Silvergate was that they lent to crypto depositors, those depositors were flighty, when rates rose they suffered m2m losses on bond portfolios, and ended up insolvent

except... that's not true. silvergate weathered the storm, even though short sellers (cohodes) and members of congress like warren encouraged a bank run, based on rumors that silvergate had criminal exposure to FTX (they have since been totally cleared of those allegations)

they suffered huge redemptions after FTX but were still solvent and able to do business. only there was 1 problem: the Fed told them that they had to reduce their crypto exposure to only a nominal ("ancillary") part of their business...

this is like telling a dunkin that they cant sell donuts or coffee. silvergate was a boutique crypto bank that served the crypto industry. so after the Fed came out with this new informal guidance, their business ceased to exist, and they voluntarily liquidated

the bank's assets were also toxic as it became clear with SVB and Silvergate that any crypto related lines of business would NOT be eligible to be sold according to the OCC. this included SEN and Signet as well as crypto deposits at those banks

I broke the story in two pieces in @PirateWires in 2023 and since then "operation choke point 2.0" has become normalized in the discourse

1)

2) piratewires.com/p/crypto-choke…
piratewires.com/p/2023-banking…

one point i've endeavored to make is that Silvergate died by murder, not suicide. the critical point is that the Fed told them after the drawdown that they had to cut their crypto deposits to 15% of their book, dooming them. (this is obviously unconstitutional, by the way)

in my original reporting I thought this was the FDIC, but it was actually the SF Fed that was passing down this guidance. but it had the same effect - killing pro-crypto banks, and making crypto firms unable to get banking

ANYWAY, and the reason I'm writing this thread –

until now, we haven't had any actual evidence of the scandal at Silvergate, beyond statements made by bank executives on background to journalists.

most of my reporting on OCP 2.0 has been corroborated hundreds of times over by folks affected, but the Silvergate stuff has remained a mystery since they have been in wind-down mode and have been settling with the SEC and so on (there's another story here about the settlements, but that's for another day)

so what's new now is, Elaine Hetric, former chief administrative officer of Silvergate, filed a declaration as part of Silvergate's Chapter 11 filings... for the first time, it completely and totally corroborates what I wrote in my reporting. and it's all totally on the record

you can find it here: cases.stretto.com/public/x353/13…

we have NEVER had a Silvergate executive able to go on the record and tell the real story of what happened. With Signature, at least Barney Frank was willing to talk. But because of the litigation and bankruptcy proceedings, Silvergate execs couldnt talk

Hetric's affidavit is fascinating. She first talks about the infamous Fed/FDIC/OCC "joint statement" in jan 2023 that was a first sign something was wrong

Hetric points out that Silvergate was able to weather the drawdown associated with rate rises and crypto industry balance sheet contraction - they were still solvent when the dust had cleared

This is the smoking gun: Silverage was solvent and able to operate, but the Fed had informed them they had to curtail their crypto business. Without a crypto business, they would have had to reshape the entire firm. It was _this_ that caused them to liquidate.

She also discusses the Signature receivership and points out further evidence of Choke Point (as I wrote at the time) coming from the fact that crypto-related bank lines of business were NOT included in the acquisitions

Hetric is very stark, writing: "This public signaling and sudden regulatory shift made clear that, at least as of the first quarter of 2023, the Federal Bank Regulatory Agencies would not tolerate banks with significant concentrations of digital asset customers, ultimately preventing Silvergate Bank from continuing its digital asset focused business model."

so the Biden bank regulators made it impossible for banks servicing a particular legal industry to operate. and in doing so, they actively caused the collapse of certain banks, namely Silvergate and Signature. these banks did not die by suicide but by murder. this remains a gigantic scandal and no one has ever faced any responsibility for it – not does the press or the public really know the truth. and the Biden admin keeps denying its role in OCP2.0 even though the evidence is abundantly clear.

Hetric's testimony is so important because it's direct, on the record, under penalty of perjury, evidence of what we have known all along, but no one has been willing to admit: the Biden admin directly forced Silvergate out of business, they did NOT die on their own due to mismanagement or bad trades. they were killed because the Fed said they weren't allowed to service crypto clients, as a bank. and when they liquidated, the crypto lines of business like SEN were tossed in the garbage, rather than being allowed to continue to exist.

and by the way, what the Biden admin is doing is blatantly 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

cooperkirk.com/wp-content/upl…

i'm still so fired up about this over a year later, because the popular narrative around silvergate and signature is "oh they just made stupid balance sheet mistakes" when the truth is they were taken out back and shot by their own regulators. the fragility of the crypto banks was worsened by folks like Sen Warren publicly calling for a bank run and making false allegations that these banks had criminal exposure to FTX. which proved to be a HUGE LIE. the fact that a sitting senator encouraged a bank run is completely insane, by the way!

and then the regulators took the outflows from these banks as evidence that crypto was indeed too risky for banks to deal with, and used that as an excuse to clamp down and install new rules making it impossible to be a crypto bank – dunkin banned from selling donuts.

the whole thing is such a maddening scandal, it makes my blood boil, which is why it's so important we get to the truth, and testimony like Elaine's is so important

if we let the Biden admin pretend they did nothing wrong and these banks just happened to die on their own, they will do it again. as I write, they are still actively engaging in the suppression of the crypto industry via the deprivation of banking. if you are an entrepreneur of have any exposure to crypto, you should be upset about this too. they are targeting your livelihood and making it impossible for you to operate normally, by making banking inaccessible/expensive.

i feel extremely vindicated - my original reporting has been 100% proven correct since it was published in 2023 (with small details wrong, like the Fed, not the FDIC imposing the 15% cap)

but i'm not happy, i'm upset because even though people talk about OCP2.0, no one really understands how bad of a scandal it was. the government destroyed several banks because they didn't like that they served a total legal industry, that's the plain truth of it. it's 10x worse than people think.

reading list:

my original reporting:



american bankers coverage of Hetric's testimony:

cooper & kirk whitepaper on choke point 2.0:


Hetric's declaration:
piratewires.com/p/crypto-choke…
piratewires.com/p/2023-banking…
americanbanker.com/news/silvergat…
cooperkirk.com/wp-content/upl…
cases.stretto.com/public/x353/13…