Silvergate Capital, a crypto-focused bank, suffered a bank run following the collapse of cryptocurrency exchange FTX, which forced the company to sell assets at a significant loss in order to honor $8.1 billion worth of customer withdrawals.
according to thursday report good Per The Wall Street Journal, the crypto bank had to sell $5.2 billion of debt securities it held on its balance sheet to cover about $8.1 billion in user withdrawals. As a result, it incurred a loss of $718 million, which reportedly exceeds the bank’s total profits since 2013.
Furthermore, the company’s preliminary Q4 results revealed that it also saw a significant reduction in crypto-related withdrawals, which dropped by 68% in Q4 2022. The bank has $11.9 billion in deposits from digital asset customers in 2021. , which declined to $3.8 billion at the end of 2022.
Silvergate claimed it had $4.6 billion in deposits remaining at the end of Q4 2022, compared to $3.8 billion. The crypto bank also holds approximately $5.6 billion in debt securities such as US Treasuries that can be quickly sold. Silvergate CEO Alan Lane, Told,
“In response to the rapid changes in the digital asset industry during the fourth quarter, we took appropriate steps to ensure that we are maintaining cash liquidity to satisfy potential deposit outflows, and we are currently liquidating our digital assets. maintain excess cash position. Related deposits.”
As mentioned, Silvergate also 40% cut off of its employees, which amounts to approximately 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”. The now bankrupt FTX was also a client of the company, which facilitated payments between crypto hedge fund Alameda and the crypto exchange. Its role in the FTX saga is also being investigated.
Crypto market in chaos
Apart from Silvergate, some other high-profile crypto companies are also struggling amid the ongoing crypto bear market. For one, crypto brokerage Genesis Global Trading, which recently told clients that they I need more time is considering filing for bankruptcy to resolve the financial crisis in its lending business.
According to Thursday’s report wall street journalThe company has laid off 30% of its staff as it deals with heavy losses from loans made to Bankman-Fried’s now-bankrupt Alameda Hedge Fund as well as Three Arrows Capital.
Meanwhile, Alex Mashinsky, the former CEO of now-bankrupt cryptocurrency lender Celsius Networks, is being prosecuted by the New York attorney general for defrauding hundreds of thousands of investors who deposited billions of dollars into the platform.
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