Many of you may 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 standard reporting around Silvergate was that the bank lent to crypto depositors and those depositors were flighty; when rates rose, Silvergate suffered M2M losses on bond portfolios and ended up insolvent.

Except that's not true. Silvergate weathered the storm, even though short sellers and members of Congress like Sen. Elizabeth Warren (D-Mass.) encouraged a bank run based on rumors that Silvergate had criminal exposure to FTX. The company has since been cleared of those allegations.

They are targeting your livelihood and making it impossible for you to operate normally, by making banking inaccessible/expensive.

Silvergate suffered massive redemptions after FTX but were still solvent and able to do business. However, there was one problem: The Fed told the bank that it had to reduce its crypto exposure to only a nominal ("ancillary") part of its business.

This is like telling Dunkin’ Donuts that it can’t sell donuts or coffee. Silvergate was a boutique crypto bank that served the crypto industry. So after the Fed issued this new informal guidance, its business ceased to exist, and it voluntarily liquidated.

The bank's assets were also toxic, as it became clear with Silicon Valley Bank 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 Pirate Wires in 2023, and since then, "Operation Choke Point 2.0" has become normalized in the discourse.

One point I've endeavored to make is that Silvergate died by murder, not suicide. The critical point is that the Fed told Silvergate after the drawdown that it had to cut its crypto deposits to 15% of its book, dooming the bank. (This is obviously unconstitutional, by the way.)

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

Until now, we haven't had any 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. Still, the Silvergate stuff has remained a mystery since the bank has been in wind-down mode and has 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 that Elaine Hetrick, former chief administrative officer of Silvergate, filed a declaration as part of Silvergate's Chapter 11 filings. For the first time, it completely corroborates what I wrote in my reporting.

And it's all on the record. You can find it here.

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 couldn’t talk.

Hetrick's affidavit is fascinating. She first talks about the infamous Fed/FDIC/OCC "joint statement" in January 2023 that was a first sign something was wrong: “At the time of the First Joint Statement, Silvergate Bank’s remaining deposit base was highly concentrated with crypto-asset related depositors, as it had been for several years.”

Hetrick points out that Silvergate was able to weather the drawdown associated with rate rises and crypto industry balance sheet contraction – the company was still solvent when the dust had cleared. “The crisis of confidence across the digital asset industry, along with similar problems faced by banks across the country, caused a ‘run on the bank.’”

Silvergate Bank was able to manage this bank run and pay all its depositors as they withdrew funds as a result of its liquidity risk management and planning. In an article included in the Federal Reserve Bank of St. Louis’s Economic Synopses detailing the speed and size of the most severe bank runs in 1984, 2008 and 2023, Silvergate Bank was the only bank included in the list of most severe bank runs that did not fail, experience a forced sale or government takeover or require government funds for stabilization.

This is the smoking gun: Silverage was solvent and able to operate, but the Fed had informed executives that 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: “The increased supervisory pressure on Silvergate Bank and other banks focused on servicing crypto-asset businesses forced Silvergate Bank to a point where it would have needed to remake its business model away from its focus on crypto-asset businesses, seek to sell itself as a going concern in the shadow of the regulatory overhang or begin winding down its affairs[.]”

Hetrick 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. “The closure and sale of the failed Signature Bank is illustrative of the intense regulatory pressure faced by banks in the digital assets industry at that time,” she notes.

“On March 20, 2023, the FDIC announced Signature Bank was sold to Flagstar Bank, N.A., and that the sale did not include the transfer of cash depositors related to Signature Bank’s digital asset banking business.”

Hetrick 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 serving 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. Neither the press nor the public really knows the truth. And the Biden administration keeps denying its role in OCP 2.0 even though the evidence is abundantly clear.

Hetrick'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 that no one has been willing to admit: The Biden administration directly forced Silvergate out of business. The bank did NOT die on its own due to mismanagement or bad trades. It was killed because the Fed said it wasn't allowed to serve crypto clients, as a bank. When executives liquidated, the crypto lines of business like SEN were tossed in the garbage rather than allowed to continue to exist.

And by the way, what the Biden administration 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.

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 that it makes my blood boil, which is why it's so important that we get to the truth and testimony like Elaine's is so important.

If we let the Biden administration pretend government did nothing wrong and these banks just happened to die on their own, regulators will do it again. As I write, they are still actively suppressing the crypto industry via the deprivation of banking. If you are an entrepreneur or 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. Since it was published in 2023, my original reporting has been 100% correct (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 OCP 2.0, no one really understands how bad a scandal it was. The government destroyed several banks because the government didn't like that they served a totally legal industry. That's the plain truth of it. It's 10 times worse than people think.

This article originally appeared as a thread posted at X. It has been lightly edited for clarity.