Citadel Offered to Buy Circle's Silicon Valley Bank Deposits Before Regulators Took Control
Ken Griffin’s Citadel over the weekend offered to buy at a discount the $3.3 billion of deposits Circle Internet Financial had tied up in Silicon Valley Bank, said people familiar with the matter.
Circle at the time was dealing with the major cryptocurrency coin it operates, USD Coin, breaking its peg after the stablecoin issuer disclosed it had $3.3 billion stuck at Silicon Valley Bank. USD Coin is a virtual stablecoin meant to mimic the value of the U.S. dollar. Citadel’s offer was meant to provide Circle with liquidity while its deposits were inaccessible.
It couldn’t be determined how much of a discount Citadel sought.
Mr. Griffin’s hedge-fund firm, which has a history of profiting from assets it buys from failed firms, sent Circle a term-sheet on Sunday, hours after a Circle adviser approached Citadel to discuss Circle’s situation, one of the people said.
Those talks fell apart when U.S. regulators announced emergency measures Sunday evening, including the guarantee of all deposits of SVB, in an effort to shore up confidence in the banking system. USD Coin has since regained its weekend losses and traded around $1.
Citadel bought distressed assets from Enron, Amaranth LLC and Sowood Capital Management, profiting handsomely. More recently it, along with Steven Cohen’s Point72 Asset Management, invested a combined of $2.75 billion in Melvin Capital Management during the meme-stock mania of January 2021 in exchange for a share of Melvin’s revenues. Citadel aggressively pared back its exposure to Melvin before Melvin wound up closing and returning client money.
Citadel is one of a number of hedge funds that has been looking to profit from the weakening and eventual collapse of Silicon Valley Bank and the aftershocks that have hit the banking sector. Some hedge funds had been betting against, or shorting, shares of Silicon Valley Bank and other regional banks. Creditors of SVB Financial Group, Silicon Valley Bank’s parent company, including some hedge funds, have formed a group in anticipation of a potential bankruptcy filing, though which they hope to profit from a sale of the collapsed firm’s assets.