Silvergate Cuts Workforce, Sold Assets at Steep Loss to Cover $8.1B in Withdrawals

The recent FTX fiasco has triggered a run on crypto-focused bank Silvergate Capital, thereby forcing the bank to sell off its assets at a steep loss and downsize its workforce by 40% to cover $8.1 billion in withdrawals. The cut represents more than 200 employees at the company.

Silvergate Sold Assets at a Steep Loss to Raise Liquidity

According to a report by the Wall Street Journal on Thursday, Silvergate experienced a withdrawal surge on its platform following FTX’s collapse, and to cover the withdrawals, the bank liquidated debt it was holding on its balance sheet, resulting in a loss amounting to $718 million. The loss exceeds Silvergate’s total profit since 2013, according to the report.

As a result, the bank downsized its workforce and said it would pare back its businesses. Silvergate has also canceled plans to launch its digital currency, writing off approximately $196 million it had paid to Facebook to buy the technology in building the project.

Silvergate is a provider of financial infrastructure solutions to the digital asset industry. In November, the bank stated its exposure to FTX. At the time, Silvergate noted that FTX represented about 10% of its total deposits from digital asset customers.

Deposits Plunge Following FTX Debacle

Following FTX’s collapse, Silvergate experienced a decline in deposits and a surge in withdrawals as clients moved to take caution.

Silvergate said it had $3.8 billion in total deposits in Q4, down from $11.9 billion in Q3. The firm said that average deposits from crypto customers declined to $7.3 billion in Q4 from $12.0 billion in Q3. The bank also noted that as of the end of December 2022, approximately $150 million of its deposits were from customers that have filed for bankruptcy.

Shares of Silvergate (SI) plunged 40% and traded more than $12 in pre-market trading following the latest announcement.

Bullish on Crypto

Meanwhile, despite all the numbers, Silvergate says it remains bullish on crypto and has the funding to handle a “sustained period of transformation.”

“While Silvergate is taking decisive action to navigate the current environment, its mission has not changed. Silvergate believes in the digital asset industry,” the bank said in a statement.