Customers withdrew $8.1 billion in deposits from Silvergate in late 2022, forcing the crypto-focused US bank to sell assets and underscoring how FTX’s implosion has impacted the regulated financial sector.
The California-based group’s announcement on Thursday that its deposits had shrunk to $3.8 billion on Dec. 31 from $11.9 billion at the end of September sent its shares down 40 percent in premarket trading in New York.
Silvergate, a member bank of the Federal Reserve and listed on the New York Stock Exchange, has come under severe pressure over the past year as crypto asset prices have fallen and several large companies have gone bankrupt. Its shares fell 88 percent in 2022.
Silvergate has grown from a tiny community lender to a major crypto bank in recent years and has been key to providing services to Sam Bankman-Fried’s now-collapsed crypto empire.
The group said Thursday in a preliminary earnings report for the fourth quarter that Silvergate had $5.2 billion worth of debt. It added that $150 million of its deposits came from customers who filed for bankruptcy.
The group is cutting 200 employees to “account for the economic realities” facing its business and the cryptocurrency industry, which makes up 40 percent of its workforce, it said Thursday.
It added that it held $4.6 billion in cash and equivalents, “which exceeds deposits,” and $5.6 billion in US government and agency-backed debt. Silvergate added that it plans to sell “a portion” of the debt in early 2023.
The report did not include a complete statement of the Group’s balance sheet or income statement; Silvergate announced it will be releasing its full quarterly and annual earnings report on January 17th.
Silvergate is also under scrutiny from US lawmakers. Last month, senators, including Elizabeth Warren, wrote to the bank’s chief executive officer, Alan Lane, urging clarity about their role in accepting customer deposits for Bankman-Fried’s crypto investment firm Alameda Research, which the former billionaire says will ultimately go to the FTX should go to the stock exchange.
“Silvergate appears to be at the center of abusive transfers of customer funds,” the senators wrote, adding that its involvement showed “egregious failure.”
Silvergate defended its role in accepting deposits for Alameda in December, saying it conducted “extensive due diligence” and so on
“when Silvergate received payments made to Alameda Research and credited them to the account of the same name. . . this was in accordance with the email sender’s instructions and industry practice.”
Source: Crypto News Deutsch