• Silvergate sold off assets at loss and cut 40% of its staff to cover $8.1 billion in customer withdrawals.
• The bank liquidated debt on its balance sheet, resulting in a $718 million loss.
• Silvergate canceled its plans to launch a digital currency project and dismissed 200 employees.
The recent FTX debacle has caused a ripple effect that has impacted Silvergate, a leading crypto-focused bank. After customers began withdrawing large amounts of money, Silvergate was forced to sell assets at a loss and cut staff to cover the $8.1 billion in withdrawals.
Silvergate reportedly liquidated debt on its balance sheet in an effort to keep up with customer withdrawals, resulting in a $718 million loss for the company. This was a massive hit for the firm, surpassing their profits since 2013. Additionally, crypto-related deposits in the firm dropped by 68% in the fourth quarter of last year. This prompted Silvergate to lay off 200 members of its staff, which was around 40% of its total number of employees.
The company also had to cancel its plans to launch its own digital currency project, writing off almost $200 million that it paid Facebook to purchase the technology it built for the Diem project. Even with these setbacks, Silvergate remains committed to its crypto-related services and has assured customers that it has enough funds in its reserves to handle the current situation.
The bank has come under scrutiny from United States lawmakers due to its ties to FTX and Alameda Research. Three U.S. senators wrote a letter to Silvergate to question the bank’s involvement in customer losses as the FTX exchange collapsed. Silvergate has yet to respond to the letter and provide an explanation for its alleged failure to monitor and report suspicious activity.