In the last three months of the previous year 2022, Crypto Bank Silvergate reported loss of $1 billion. Silvergate held deposits for FTX businesses and Almeda Research. When the exchange collapsed, the bank’s customers withdrew more than $8 billion in digital asset deposits.
Silvergate was forced to sell $5.2 billion in assets at a loss to cover the cost and remain liquid – leading to the fourth quarter loss. The bank says that to prepare for a “sustained period of transformation” it will offboard some non-core customers and ditch some of its product portfolio. It has also confirmed that 40% of its workforce – 200 people – have been laid off and that it has written off the $196 million price its paid for the assets of Facebook’s digital currency, Diem.
Alan Lane, CEO, Silvergate, says: “While we are taking decisive actions to navigate the current environment, our mission has not changed. We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers.
Silvergate Bank
The California-based bank was founded in 1988 as a savings and loan association, transitioning into one of the key players in the crypto ecosystem. With many traditional banks wary to work with crypto companies, Silvergate positioned itself around the industry, serving more than 1,500 digital currency and financial technology companies.
It created the Silvergate Exchange Network, allowing exchanges like Coinbase and Binance to transfer U.S. dollars between each other. Its assets under management and valuation exploded with the bull market, with its share price growing more than 1,500% between November 2019 and November 2021. By September 2022, 90% of the bank’s deposit base came from crypto firms.
Its fortunes also fell with the crypto industry. One of the bank’s customers was FTX, which collapsed in November. The company drew criticism from lawmakers. In a December letter, Sens. Elizabeth Warren (D-Mass.), John Kennedy (R-La.), and Roger Marshall (R-Kans.) wrote to seek information about the relationship between Silvergate, FTX, and Alameda after allegations that Sam Bankman-Fried’s empire had been using customer funds for its own trades.
With the plummeting industry, Silvergate’s outlook worsened. In the fourth quarter of 2022, Silvergate saw an outflow of $8.1 billion in digital asset deposits and laid off 40% of its staff, or about 200 employees, which it announced prior to its earnings report in a filing to the U.S. Securities and Exchange Commission on Jan. 5. It also sold assets at a loss of $718 million.
In a statement that accompanied the filing, Silvergate CEO Alan Lane said that the company was taking “commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows.” Its share price has dropped nearly 90% from mid-August.
