Silvergate cut 40% of its staff as the crypto-focused bank reels from FTX’s implosion. Crypto-related deposits fell 68% in the fourth quarter of 2022, according to the firm. Silvergate shares plunged more than 40% on Thursday. Loading Something is loading.
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Silvergate cut 40% of its staff, or 200 employees, “to account for the economic realities” facing its business and the cryptocurrency industry as a whole, the firm said on Thursday.
The collapse of FTX in particular sparked a run that forced the crypto-focused bank to cover $8.1 billion worth of customer withdrawals in late 2022.
Silvergate shares plunged more than 40% on Thursday and are down 91% from a year ago.
To meet the spike in withdrawals, Silvergate has had to sell assets at significant losses, liquidating debt the firm was holding on its balance sheet. The $718 million the company lost selling debt far exceeds Silvergate’s total profits in the past decade, according to the Wall Street Journal.
Crypto-related deposits declined 68% in the fourth quarter of 2022, shrinking from $11.9 billion in late September to $3.8 billion on December 31. The firm added that it has $4.6 billion in cash and cash equivalent, which Silvergate says exceeds its deposits.
The company also holds $5.6 billion of US government and agency-backed debt, which the firm plans to sell part of this year.
FTX and other crypto firms under founder Sam Bankman-Fried’s control accounted for about $1 billion of the bank’s deposits. Overall crypto-related deposits account for about 90% of Silvergate’s total, but the bank was able to survive the surge in withdrawals because most deposits are in cash or easy-to-sell securities, the Journal said.
Elsewhere, Silvergate is under fire by lawmakers, with US Senators Elizabeth Warren, John Kennedy, and Roger Marshall demanding answers from CEO Alan Lane for its business dealings with FTX and role in accepting deposits from Alameda Research, Bankman-Fried’s now bankrupt crypto hedge fund.
“Silvergate appears to be at the center of the improper transfer of billions in FTX customer funds. Americans need answers,” Warren said in a statement. “Those guilty of wrongdoing must be held accountable.”
In response to the lawmakers’ letter, Silvergate told CNBC, “Like many others, Silvergate was the victim of FTX’s and Alameda Research’s apparent misuse of customer assets and other lapses of judgment and we believe our full cooperation will help set the record straight about our role in the digital asset ecosystem.”