The collapse of FTX sparked a bank run on Silvergate, forcing the financial institution to sell assets at a steep loss to cover some $8.1 billion in withdrawals. The bank has also laid off 40% of its staff, or about 200 employees.
Silvergate is experiencing the aftermath of the FTX fall
According to a statement released by the bank, crypto-related deposits dropped by 68% during the fourth quarter. To cover the withdrawals, Silvergate sold off its debt. The bank lost about $718 million on the sale, which is more than the bank’s total profits since 2013.
Silvergate said it would reduce its workforce by about 40% in response to the crypto-related decline. It also wrote off the $196 million spent on Facebook’s failed attempt to establish its digital currency network using blockchain technology.
For companies in the crypto industry, Silvergate provides various services, such as taking deposits and establishing a network that connects investors to exchanges. Deposits from FTX, a company controlled by Sam Bankman-Fried, contributed about $1 billion to the bank’s total deposits.
Still committed to crypto
Unlike most banks, Silvergate is not structured like a typical bank. Instead, it focused on providing bank accounts and services to investors and crypto exchanges. Most of its deposits come from crypto-related accounts, which account for around 90% of the bank’s total deposits.
The bank noted that it is committed to the crypto industry and has the necessary resources to handle a prolonged period of transformation.
During the fourth quarter, the bank had more cash on hand than it had in its remaining deposits. The amount was $4.6 billion, more than the $3.8 billion in its accounts. It also had another $5.6 billion worth of debt securities, such as US Treasurys, that it could sell quickly. In addition, the average daily volume on its network increased during the fourth quarter.
“While Silvergate is taking decisive action to navigate the current environment, its mission has not changed. Silvergate believes in the digital asset industry.”
Notably, Silvergate will report its full fourth-quarter results in the coming weeks.
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