(Bloomberg) -- Silvergate Capital Corp. was dealing with the same problem many small US banks face: How do you differentiate yourself when larger competitors do everything you do, only better?

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The solution it found was to focus on a sector other banks didn’t want to touch: cryptocurrency. Over the course of a decade, the La Jolla, California-based company transformed itself from a bank catering to small businesses into a publicly traded firm known for providing banking services to major crypto clients such as Coinbase Global Inc. and Gemini Trust Co. — as well as Sam Bankman-Fried’s FTX and Alameda Research.

The arrangement was going well, with Silvergate shares soaring to an all-time high of $222.13 in November 2021 as digital-asset prices set records. Then a painful crypto winter set in, with the value of virtual coins sinking. Capping off what was already a difficult year for the industry, crypto exchange FTX and its sister entities spiraled into bankruptcy last month, and are now facing probes from regulators including the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Department of Justice over missing funds and trading on the platform.

The collapse raised questions about how regulators, investors and the retail traders who lost everything fell for what may have been a scam. But it also raised questions for Silvergate, which held deposits for FTX units and Alameda Research, the hedge fund at the heart of the crypto exchange’s collapse. Now, lawmakers are scrutinizing the bank as short sellers circle, with Silvergate stock slumping to about $23 a share.