MoFo Secures Favorable Settlement for Silvergate Directors and Officers

Morrison Foerster played a leading role in the Chapter 11 cases of Silvergate Capital Corporation and its affiliates, representing a former officer of the company and securing a favorable settlement that benefited its client and a broader group of directors and officers, for whom the firm served as a de facto spokesperson.

Shortly after entering Chapter 11, Silvergate moved to estimate and cap indemnification obligations owed to its directors and officers as part of a broader effort to maximize recoveries for its preferred shareholders. Through early-stage advocacy and strategic use of recent Third Circuit authority, MoFo successfully blocked the debtors’ strategy and secured a favorable global settlement. Among other things, Silvergate agreed to release all estate claims against its directors and officers, to fund a resolution of related securities litigation, to pay all indemnifiable legal fees, and to establish a $60 million backstop (up from $10 million) for future indemnification obligations. The outcome represents a significant victory for Silvergate’s directors and officers.

California-based Silvergate Bank was a prominent financial institution focused on the crypto and digital asset industry. In 2023, it commenced a voluntary liquidation in response to instability in the crypto markets and increased regulatory scrutiny. Its parent, Silvergate Capital Corporation, subsequently filed for Chapter 11 protection in the District of Delaware in September 2024 to wind down its remaining assets. The cases were structured as a liquidation, with the debtors pursuing a strategy that sought to estimate and cap the company’s contingent liabilities, including indemnification claims owed to directors and officers, while facilitating a substantial distribution to its preferred shareholders.

MoFo’s advocacy was instrumental in driving an about-face in Silvergate’s strategy. By advancing a focused and legally grounded objection at the outset of the case, the firm secured a materially enhanced recovery for its client and other similarly situated individuals. The result underscores the firm’s ability to deliver efficient, high-impact results in complex, contested restructuring matters.

The MoFo team was led by Bankruptcy partner Ben Butterfield, Bankruptcy Litigation partner Theresa Foudy, Bankruptcy counsel Andrew Kissner, and Bankruptcy associate Darren Smolarski, with invaluable support from Investigations + White Collar partners Deborah L. Connor and Haimavathi V. Marlier.