Uncle Sean's Update - 1/6/23

​Happy Friday!!!
 
It’s the first Friday of the new year!!!  Here is the Uncle Sean Update for 1/6/23:
 
Not to brag too much but I am pretty impressed with myself that I actually wrote 2023 as opposed to 2022 😊 – Ah, small victories!!!
 

• Blue Ridge Bank is beefing up their BaaS compliance talent pool by bringing in Kirsten Muetzel as President of Blue Ridge Bank’s Fintech Division – NICE!!!!
  • “Muetzel brings over a decade of experience working with the Federal Reserve system, including supervising banks involved in BaaS and related partnerships. Additional experience includes being a Chief Financial Officer and Chief Risk Officer for fintech companies. Prior to working with the Federal Reserve, Ms. Muetzel worked at Goldman Sachs and Arthur Andersen. She holds a B.S.B.A degree in Accounting from the University of Arizona, an MBA from Columbia Business School, and a Master of International Affairs from Columbia University. Ms. Muetzel has maintained an active role in volunteering with numerous organizations throughout her career.”
    • Uncle Sean is very happy to see Blue Ridge leaning in and embracing BaaS more than ever!!!

 

• IT managed service provider (MSP), Integris announced they have acquired CalTech to build out a nation-wide community banking practice in the MSP space.  Can’t say I blame them because there are some awesome folks over there at CalTech doing great work for community banks.
  • Worth noting that Integris has been on a bit of an acquisition spree as of late expanding on two previous acquisitions in October 2022.

 

• The trifecta speaks!!!  The FDIC, Federal Reserve, and the Office of the Comptroller of the Currency (OCC) issued a joint statement on crypto-asset risks to banking organizations warning about "significant" risks crypto assets may pose to the broader banking system.  Some key highlights (bold emphasis added by Uncle Sean):
  • “The agencies are continuing to assess whether or how current and proposed crypto-asset-related activities by banking organizations can be conducted in a manner that adequately addresses safety and soundness, consumer protection, legal permissibility, and compliance with applicable laws and regulations, including anti-money laundering and illicit finance statutes and rules.”
  • “Based on the agencies' current understanding and experience to date, the agencies believe that issuing or holding as principal crypto-assets that are issued, stored, or transferred on an open, public, and/or decentralized network, or similar system is highly likely to be inconsistent with safe and sound banking practices.”
  • It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system.
    • Yep – sure sounds to me like they are getting serious!!!  😲

 

• Just in case it wasn’t clear enough….  The OCC released their 2022 Annual Report and Acting Comptroller Michael Hsu mentions taking a careful and cautious approach to crypto and crypto-related firms stating, “the crypto industry risk management practices lack maturity, stablecoins may be unstable, and contagion risk is high within the crypto industry.”  OUCH!!!

 

• Silvergate Capital Corporation (NYSE: SI; BHC FR 3695667; Bank Sub is Silvergate Bank – FDIC 27330) announced prelim 4Q22 financial metrics and business update detailing a substantial deposit runoff at the bank citing a “crisis of confidence” across the digital asset ecosystem from recent high profile bankruptcies.  Silvergate disclosed total deposits from digital asset customers declined 68% ($8.1B) to $3.8 billion at Dec 31, 2022, compared to $11.9 billion at Sep 30, 2022.
  • To cover the rapid liquidity draw, Silvergate sold $5.2 billion of debt securities for cash proceeds during the fourth quarter of 2022 resulting in a loss on the sale of securities and related derivatives of $718M.  As of Dec 31, 2022, Silvergate held total cash and cash equivalents of approximately $4.6 billion, which is in excess of the $3.8B in deposits from digital asset customers.
  • Silvergate is also taking an impairment charge of $196M in 4Q related to the Diem purchase (remember Facebook Diem) stating that “the launch of a blockchain-based payment solution by Silvergate is no longer imminent.”
  • They are also laying off 200 employees, or about 40% of its workforce, and exited its mortgage warehouse lending business resulting in about $8M in restructuring costs to be recognized in 1Q2023.

 

• Meanwhile, SBF pleaded not guilty to 8 counts of fraud, conspiracy, campaign-finance violations, and money laundering in federal court in Manhattan.  Trial date is now set for October 2, 2023.

 

• In direct contagion of the FTX debacle, Genesis lays off 30% of staff in a second round of cuts and is contemplating bankruptcy filing per The Wall Street Journal (apologies for the WSJ paywall).  Genesis has halted withdrawals since Nov 16.
  • Now this is starting to get ugly - Genesis ongoing dispute with exchange company Gemini broke into public view this week (funds tied to Gemini's Earn program — about $900 million — is locked up inside Genesis) with Gemini accusing DCG (parent company of Genesis) of “bad faith stalling tactics” over frozen funds.

 

• Compliance is King!  Coinbase settles with New York financial regulator for $100M regarding “historical” shortcomings in AML and KYC standards.  Coinbase will pay $50M in fines and invest $50M to strengthen their internal compliance.  Here is the full New York State DFS / Coinbase consent order.

 

• Wyre (crypto payment platform) is allegedly shutting down just a few months after Bolt Financial backed out of a $1.5B deal to acquire the company.

 

• CardWorks Servicing announced the acquisition of Dataline Systems, LLC.  CardWorks Servicing, LLC is a wholly owned subsidiary of CardWorks, Inc. which is the parent of Merrick Bank (Utah ILC – FDIC 34519; Credit Card Issuer).

 

• Just in case you missed it - the IRS announced the standard mileage rates for 2023 of 65.5 cents per mile an increase of 3 cents per mile from the second half of 2022.

 
 
Random Uncle Sean Stuff:

• I was in beautiful East Texas this week enjoying the peace and pristine views of Lake Bob Sandlin.  While there, Aunt Patty and I made it into Mount Pleasant, TX (home of Guaranty Bank & Trust) where we ate dinner at Nardello's Pizza Tavern – and it was AMAZING!!!!  The Outlaw pizza with its smokey flavor and the Hog Hunter sausage pizza are nothing short of spectacular - and the Strawberry Moscato Punch gets two thumbs up from Aunt Patty!  If you find yourself in Mount Pleasant, do yourself a favor and eat at Nardello’s – you won’t regret it.

• Congrats to Georgia and TCU for making it to the College Football National Championship Game scheduled for Monday, Jan. 9th at 6:30 PM CST on ESPN at SoFi Stadium - GO FROGS!!!!
• And of course Dad Jokes are back!!!!
  • When snails fight it’s an all-out slugfest….
  • Aunt Patty said she likes it when I sing tenor….  “Tenor eleven” miles away! 😝
  • It’s never too late to start exercising.  Which is precisely why I’m putting it off!  LOL!!!
  • Well that’s odd, I don’t remember being absent minded…  😊

 
 
Have a GREAT weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at smayo@fedfis.com | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | info@fedfis.com #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.