Silvergate Preserves $1.37 Billion in NOLs as Spring Valley Lots Carries Wind-Down
ElevenFlo Research
August 8, 202616 min read
Silvergate Capital Corporation's chapter 11 plan went effective on March 31, 2026, distributing the remaining value of the failed digital-asset bank through the Argent Liquidation Trust and leaving Spring Valley Lots, LLC — a Delaware real-estate holding subsidiary with no independent operations — as the sole surviving case in the jointly administered group. The Bankruptcy Court for the District of Delaware closed the Silvergate Capital and Silvergate Liquidation Corporation cases on April 16, 2026 and consolidated all post-effective administration under the smallest debtor's caption, making Spring Valley Lots the procedural shell through which claims reconciliation, retained causes of action, and liquidation-trust matters now run.
The three debtors — Silvergate Capital Corporation ("SCC"), Silvergate Liquidation Corporation ("SLC," formerly Silvergate Bank), and Spring Valley Lots, LLC ("SVL") — filed voluntary petitions on September 17, 2024 under lead case Silvergate Capital Corporation, No. 24-12158 (KBO), before Judge Karen B. Owens. This was not a liquidity-driven collapse: Silvergate Bank had already returned all customer deposits and relinquished its banking charter more than a year before the filing, and the first-day motions were approved without any debtor-in-possession financing. The chapter 11 cases existed to distribute residual value, preserve corporate tax attributes, and resolve securities litigation through a court-supervised plan of liquidation.
Digital-Asset Banking Collapse and Orderly Wind-Down
Silvergate Bank built a digital-asset-focused commercial banking franchise centered on the Silvergate Exchange Network ("SEN"), a real-time payments rail that concentrated the bank's deposit base in crypto-industry customers. When several large crypto firms became insolvent in late 2022, that concentration became the bank's central vulnerability: the November 2022 deposit outflows forced Silvergate to sell long-dated investment securities at a loss to honor withdrawals, eroding its capital even as it paid depositors in full and avoided any federal government funding.
Spring Valley Lots is a Delaware limited liability company, wholly owned by SLC, that holds real estate acquired through foreclosure during the bank's lending operations and has no independent business beyond servicing those parcels. SVL filed alongside its parents and was placed under joint administration so its foreclosed real estate could be wound down inside the same court-supervised process rather than stranded in a separate proceeding.
Capital Structure and the $200 Million Preferred Preference
The funded capital sat almost entirely at the SCC holding-company level; Spring Valley Lots carries no funded debt of its own. The most consequential instrument for plan economics is SCC's 5.375% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock, with a $200 million aggregate liquidation preference across 200,000 shares issued at $1,000 per share. Holders of approximately 63% of that preference signed the restructuring support agreement that anchored the plan.
Below the preferred sit two tranches of subordinated debentures supporting trust preferred securities (TruPS): the 2001 Subordinated Debentures of $14,790,662.80 in principal plus accrued interest, issued to Silvergate Capital Trust I, and the 2005 Subordinated Debentures of $3,490,444.56 in principal plus accrued interest, issued to Silvergate Capital Trust II. The TruPS were issued by the two statutory trusts, with SCC guaranteeing them through the related debentures. At the equity layer, SCC had 31,729,832 shares of Class A common stock outstanding and no Class B shares, the equity tier whose treatment would later retain ownership in Reorganized Silvergate.
Argent Liquidation Trust and Class Treatment
The First Amended Joint Chapter 11 Plan is a plan of liquidation built around the Argent Liquidation Trust, which received the debtors' liquidation-trust assets on the effective date, retained estate causes of action, and assumed responsibility for claims reconciliation and distributions. Because Silvergate Bank had already monetized its loan and securities portfolios and returned all deposits before filing, the debtors entered chapter 11 with enough unencumbered cash to fund the wind-down and the first-day relief was limited to standard cash management, tax, wage, vendor, and utility motions — no DIP facility was sought or needed.
The plan sorts claims and interests into eleven classes. Classes 1 through 4 — other priority claims, secured claims, general unsecured claims, and subordinated notes claims — are unimpaired and deemed to accept. The impaired voting constituencies are Class 5 (Indemnified Individuals Indemnifiable Claims), created to carry the indemnification settlement described below, and Class 8 (Preferred Stock Interests). The remaining classes cover intercompany claims and interests, Class 9 common stock, section 510(b) claims, and a Bhatia Litigation Class. Octus reported the plan's reorganization-trust architecture and the roughly 63% preferred support behind it.
Two priorities of beneficial interests. The Argent Liquidation Trust issues First Priority Liquidation Trust Beneficial Interests to the Class 8 preferred holders and a Second Priority interest to Reorganized Silvergate. The debtors disclosed that distributions "will not satisfy the Preferred Stock Liquidation Preference" of $200 million, so Class 8 is impaired with only a partial recovery and the First Priority holders agreed to a negotiated allocation with the Second Priority holder; Law360 reported at the first-day stage that the structure was designed to repay creditors in full and preferred holders in part. The plan also requires a "Data Retention and Production Reserve" to fund the trustee's compliance with ongoing regulatory data-retention obligations.
Releases and exculpation. The confirmation order approved consensual debtor and third-party releases for the Released Parties, covering prepetition and postpetition claims tied to the debtors' business, securities issuances, and the negotiation of the plan. The court found the third-party releases voluntary, and the securities plaintiffs were not deemed to have opted into them merely by participating in the securities settlement. Exculpation was limited to estate fiduciaries for the period between the petition and effective dates, excepting actual fraud, willful misconduct, or gross negligence, and the releases carve out the liquidation trust's and Reorganized Silvergate's retained causes of action.
The Settlements That Cleared Confirmation
Two settlements, not one, made confirmation possible. The first was a Global Settlement that bundled two non-severable agreements. Its securities component resolved the consolidated putative securities class action in the Southern District of California for a $37.5 million cash settlement, funded by $27.5 million from remaining director-and-officer insurance, $4.68 million from the underwriters, and $5.32 million in estate cash paid on the effective date. Law360 highlighted the rare estate contribution, and Bloomberg Law reported the deal turned on how the D&O insurance proceeds would be allocated between the estate and shareholders. That $5.32 million was redirected from distributions otherwise earmarked for preferred equity.
Indemnification settlement. The Global Settlement's second leg resolved SCC's outstanding indemnification obligations to current and former directors, officers, and certain employees, allowing the debtors to set agreed indemnification reserves and to add Class 5 for Indemnified Individuals. In exchange, those individuals supported the plan and received releases relating to claims reviewed by the estate's investigation committee. Morrison & Foerster, which represented the directors and officers, characterized the outcome as a favorable settlement for the D&Os. Banking Dive separately reported the class-action settlement and its insurance-allocation backdrop.
Common Stock Settlement. A second, distinct settlement — a Common Stock Settlement memorialized in a July 1, 2025 term sheet among the debtors, the Ad Hoc Preferred Stockholder Group, and "Common Stock Sponsors" Stilwell Activist Investments, L.P. and Exploration Capital Fund, LP — is the reason Class 9 common stock is reinstated rather than cancelled. Under that deal the debtors emerge as Reorganized Silvergate, the company confirming in March 2026 that common equity (ticker SICP) was reinstated and that creditor and preferred-equity claims transferred to the Argent Liquidation Trust.
Common Equity, the Diem Assets, and $1.37 Billion in NOLs
The decision to keep common stock alive turned on tax attributes rather than residual equity value. Reorganized Silvergate survives as a corporate shell that retains the "Diem Assets" and Silvergate's net operating loss carryforwards — approximately $1.37 billion of federal NOLs and approximately $1.29 billion of state NOLs. Preserving those attributes requires corporate and equity continuity, which is why Octus reported the plan was structured to let common equity retain ownership in Reorganized Silvergate.
Routing residual value to Reorganized Silvergate through the Second Priority Liquidation Trust Beneficial Interest — instead of cancelling common stock in a conventional liquidation — is the structural mechanism that keeps the NOL shell intact. MarketScreener reported that Silvergate Capital emerged from bankruptcy on the effective date under the technically and administratively modified plan, without the need for any further court order.
Stilwell Examiner Motion and the SIC Investigation
The most heavily litigated contested matter of the early case was an examiner fight. On October 10, 2024, Stilwell Activist Investments, L.P. — whose nominee Joseph Stilwell sat on the board as the sole non-management independent director — moved for appointment of a chapter 11 examiner under section 1104(c). The motion alleged that the bank had failed to monitor more than $1 trillion in SEN transactions for suspicious activity between 2021 and 2022 — the same conduct underlying the SEC's monitoring findings — that it had maintained accounts for FTX and Alameda Research despite indications of fraud, and that directors and officers had sold roughly $142 million of Silvergate stock from 2019 onward, including more than $104 million of those sales in or after 2021. The motion said internal reports had flagged more than $9 billion in suspicious FTX-related transfers routed through North Dimension, a shell entity Alameda used to circumvent money-transmission rules, and that Bank Secrecy Act staff had repeatedly warned then-CEO Alan Lane and then-COO/CRO Kathleen Fraher that SEN transactions were not subject to automated monitoring even as the executives publicly described the anti-money-laundering program as sound. Stilwell also argued the debtors' Special Investigation Committee (SIC), a single director represented by debtors' counsel, was not truly independent.
The court granted the motion on December 20, 2024 but declined Stilwell's broad fraud-investigation framing, instead defining a narrow scope directing the examiner to investigate the independence and adequacy of the SIC's own review rather than relitigating the bank's collapse. The U.S. Trustee appointed Stephanie Wickouski as examiner, who began work on January 31, 2025 with Pivot Group as advisor and Bayard, P.A. as Delaware counsel. Law360 reported that the examiner ultimately found issues with the SIC investigation, and the examiner workstream — whose final fee period ran through July 31, 2025, overlapping the Global Settlement negotiations — fed into the indemnification settlement and the plan releases. Stilwell then moved from filing the examiner motion to sponsoring the equity settlement, appearing alongside Exploration Capital as a Common Stock Sponsor.
The approved awards total roughly $26.10 million in final fees and about $0.75 million in expenses across the nine professionals, with voluntary reductions of approximately $23,000 in the aggregate. Cravath and Delaware co-counsel Richards, Layton & Finger account for roughly $20.1 million, about 77% of the total, while the examiner and Pivot Group engagement came to about $0.37 million.
Following the April 16, 2026 closing of the SCC and SLC cases, Spring Valley Lots became the sole remaining open case, and the case-closing order directs all post-effective administration to proceed under its caption as "Post-Effective Date Debtor." Argent Liquidation Trust has continued routine claims work through the SVL docket, including a further extension of its removal deadline for prepetition civil actions, while the quarterly claims register reflects the limited residual claims activity that remains.
Stretto's July 2, 2026 quarterly claims register lists 13 unique claims against Spring Valley Lots, including two $5.0 billion secured claims filed by Richard Hutcheson on May 13, 2026, eight claims noticed through Clifford Chance ranging from $13.6 million to $18.9 million and filed on October 30, 2024, and an entry for FTX Trading Ltd. listed at $0.00 with "Blank" status. Claim 50, filed by Connor O'Keefe, is marked expunged. The register is a claims-listing snapshot rather than a narrative reconciliation report, so the Hutcheson-asserted amounts reflect filed claim figures rather than allowed claims or projected recoveries.
Argent Liquidation Trust filed its first post-confirmation report on August 5, 2026, covering the quarter ended June 30. The report's transfers summary shows $5.184 million in total cash disbursements since the March 31 effective date; its separate recoveries table shows $5.780 million paid on allowed general unsecured claims — 100% of the allowed amount reported — and $22.421 million paid on equity interests. Liquidation Trustee Matthew Dundon signed the filing, which remains non-final and does not state an anticipated recovery percentage for the still-impaired preferred stock class.
Key Timeline
The case spanned Silvergate Bank's March 2023 wind-down announcement, the September 2024 chapter 11 filings, a contested examiner investigation, and confirmation of a liquidating plan that left Spring Valley Lots as the sole open case.
Date
Event
March 8, 2023
Silvergate Capital announces intent to wind down and liquidate Silvergate Bank
June 1, 2023
Federal Reserve enters consent order over SEN anti-money-laundering monitoring
July 26, 2024
Federal Reserve terminates the Silvergate enforcement action
September 17, 2024
SCC, SLC, and Spring Valley Lots file chapter 11 petitions (D. Del.)
October 10, 2024
Stilwell Activist Investments moves for appointment of an examiner
December 20, 2024
Court grants the examiner motion with a scope limited to the SIC's independence
January 31, 2025
Stephanie Wickouski begins work as court-appointed examiner
April 22, 2025
Rule 9019 motion to approve the Global Settlement filed
July 1, 2025
Common Stock Settlement term sheet executed
November 13, 2025
Plan confirmed
March 31, 2026
Plan effective date; Silvergate Capital emerges from chapter 11
April 16, 2026
SCC and SLC cases closed; Spring Valley Lots retained as sole remaining case
April 30, 2026
Administrative expense and rejection-damages bar dates
June 12, 2026
Omnibus order awarding final professional compensation entered
Frequently Asked Questions
Why is Spring Valley Lots the only remaining open Silvergate case?
Spring Valley Lots, LLC is the smallest debtor — a Delaware LLC holding foreclosed real estate with no independent operations. When the Silvergate Capital and Silvergate Liquidation cases were closed on April 16, 2026, the court consolidated all post-effective administration under SVL's caption, so claims reconciliation, retained causes of action, and Argent Liquidation Trust matters now proceed there as the "Post-Effective Date Debtor."
What happened to Silvergate's common stock in the bankruptcy?
Class 9 common stock was reinstated rather than cancelled under a separate Common Stock Settlement, allowing common equity (ticker SICP) to retain ownership in Reorganized Silvergate. The driver is tax: Reorganized Silvergate retains roughly $1.37 billion of federal and $1.29 billion of state net operating loss carryforwards, and preserving those attributes requires equity continuity.
How much did the securities settlement cost the estate?
The securities class action settled for $37.5 million, but only $5.32 million came from estate cash — paid on the effective date and redirected from distributions otherwise earmarked for preferred equity. The remainder came from $27.5 million of director-and-officer insurance and $4.68 million from the underwriters.
Who is the administrative and claims agent for the Silvergate cases?
Stretto, Inc. serves as administrative advisor in the jointly administered cases and maintains the claims register; its quarterly claims register and the April 30, 2026 administrative expense and rejection-damages bar dates govern the residual claims process now running through the Spring Valley Lots docket.
What did Argent Liquidation Trust's first post-confirmation report show?
Filed August 5, 2026 for the quarter ended June 30, the report's transfers summary shows $5.184 million in total cash disbursements since the March 31 effective date; its separate recoveries table lists $5.780 million paid on allowed general unsecured claims and $22.421 million paid on equity interests. Liquidation Trustee Matthew Dundon signed the non-final report, which does not state a recovery percentage for the impaired preferred stock class.
This article was researched and written with AI assistance, using court filings, public records, and news sources. AI-generated content can contain errors. Verify all information against primary sources before relying on it. This is not legal or financial advice. Read our full disclaimer.
