Trouble is brewing for crypto bank Silvergate as the company cut staff by 40% and sold assets to cover $8.1 billion worth of customer withdrawals. Furthermore, the company saw a 68% decline in its crypto-related deposits in the fourth quarter of last year.
according to thursday report good By The Wall Street Journal, FTX’s dramatic collapse sparked a run on Silvergate, forcing the bank to sell assets at a steep discount to cover some $8.1 billion in user withdrawals.
The crypto bank liquidated $5.2 billion worth of debt securities held on its balance sheet to meet user withdrawals. As a result, it lost $718 million, which reportedly exceeds the bank’s total profits since at least 2013.
Furthermore, Silvergate saw its crypto-related deposits decrease by 68% in the fourth quarter of the year, the bank reportedly said in a preliminary release of some quarterly results. Total digital asset customer deposits to decline to $3.8 billion at the end of 2022, compared to $11.9 billion as of September 30, 2022.
Despite this, the bank remains positive in its commitment to crypto and reportedly has the funds to handle a “sustained period of change”.
The bank has also laid off 40% of its staff, which is roughly equivalent to 200 employees. In addition, the bank scrapped plans to launch its own digital currency and wrote off $196 million spent Facebook buys technology In his failed attempt to launch a crypto-based payment network.
Silvergate describes itself as “the leading bank for innovative businesses in fintech and cryptocurrency”. However, its core business appears to be facilitating payments between crypto hedge funds like Alameda and crypto exchanges like FTX.
Crypto banks are also under scrutiny for possibly facilitating illegal transactions. On December 6, three US senators wrote a letter to Silvergate to investigate the bank’s involvement in customer losses as the FTX exchange collapsed.
At the end of the fourth quarter, Silvergate said it had $4.6 billion in deposits remaining, compared to $3.8 billion. The crypto bank also has about $5.6 billion in debt securities such as US Treasuries, which can be quickly sold. It said in a statement:
“Silvergate is taking decisive action to navigate the current environment, but its mission has not changed. Silvergate believes in the digital asset industry.”
Meanwhile, the company’s shares, which are set to lose about 88% of their value in 2022, are currently down more than 37% in the pre-market.
unprecedented collapse of the Terra ecosystem, the failure of ftxAnd the crash of other high-profile crypto companies in 2022 triggered one of the worst crypto meltdowns in history that wiped out over two trillion in value from the crypto market.
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