(CBrief) – In what is the largest collapse of a bank since the 2008 bank collapse the 16th largest bank in the nation has been shut down by US regulators.

Silicon Valley Bank collapsed after there was a run on the bank by failed depositors, mainly technology workers and venture capital-backed companies, started pulling their funds, Sky News reported.

The US Federal Deposit Insurance Corporation (FDIC) has seized its assets.

It said the bank had $209 billion (£173 billion) in assets and $175.4 billion (£146 billion) in deposits at the time of failure.

It was unclear how many of the deposits were above the $250,000 (£207,000) insurance limit.

The situation had become so dire that the feds seized the assets of the bank in the middle of the work day.

Worry began when SVB announced plans to strengthen its position by raising $1.75 billion.

“This was a hysteria-induced bank run caused by VCs,” Ryan Falvey, a fintech investor of Restive Ventures, said to CNBC. “This is going to go down as one of the ultimate cases of an industry cutting its nose off to spite its face.”

“The episode is the latest fallout from the Federal Reserve’s actions to stem inflation with its most aggressive rate hiking campaign in four decades. The ramifications could be far-reaching, with concerns that startups may be unable to pay employees in coming days, venture investors may struggle to raise funds, and an already-battered sector could face a deeper malaise,” CNBC said.

“The roots of SVB’s collapse stem from dislocations spurred by higher rates. As startup clients withdrew deposits to keep their companies afloat in a chilly environment for IPOs and private fundraising, SVB found itself short on capital. It had been forced to sell all of its available-for-sale bonds at a $1.8 billion loss, the bank said late Wednesday,” it said.

Bill Ackman, the founder and CEO of Pershing Square Capital Management, said in a Twitter thread that the government may have to bailout the bank.

“The failure of @SVB_Financial could destroy an important long-term driver of the economy as VC-backed companies rely on SVB for loans and holding their operating cash. If private capital can’t provide a solution, a highly dilutive gov’t preferred bailout should be considered,” he said.

“After what the Feds did to @jpmorgan after it bailed out Bear Stearns, I don’t see another bank stepping in to help @SVB_Financial.

“The gov’t could also guarantee deposits in exchange for a dilutive warrant issuance and other covenants and protections. If @SVB_Financial is indeed solvent, this would buy time to enable SVB to restore the franchise and raise new private capital,” he said.

“To be clear, a bailout should be designed to protect @SVB_Financial depositors, not equity holders or management. We should not reward poor risk management or protect shareholders from risks they knowingly assumed.

“The risk of failure and deposit losses here is that the next, least well-capitalized bank faces a run and fails and the dominoes continue to fall. That is why gov’t intervention should be considered,” he said.

But it is not just SVB as, on Wednesday a leading cryptocurrency lender, Silvergate Capital, said it was winding down operations.

“In light of recent industry and regulatory developments, Silvergate believes that an orderly wind down of Bank operations and a voluntary liquidation of the Bank is the best path forward,” the company said, CNBC reported.

All deposits will be fully repaid, according to a liquidation plan shared on Wednesday. The company didn’t say how it plans to resolve claims against its business.

Centerview Partners will act as Silvergate’s financial advisor and Cravath, Swaine & Moore will provide legal services.

The liquidation comes less than a week after Silvergate discontinued its payments platform known as the Silvergate Exchange Network, or SEN, which was considered to be one of its core offerings. As part of the liquidation announcement, Silvergate clarified that all other deposit-related services remain operational as the company winds down. Customers will be notified should there be any further changes.