Silvergate shares fall as crypto bank reveals $8.1 billion drop in deposits

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Clients withdrew $8.1 billion in deposits from Silvergate at the end of 2022, forcing the U.S. crypto-focused bank to sell assets and underscoring how the FTX implosion has rippled through the regulated financial sector.

The California-based group revealed on Thursday that its filings fell to $3.8 billion on December 31 from $11.9 billion at the end of September, sending its shares tumbling 40% in premarket trading in New York.

Silvergate, which is a member bank of the Federal Reserve and is listed on the New York Stock Exchange, has come under severe pressure over the past year as crypto asset prices have fallen and several big players have collapsed. in bankruptcy. Its shares have fallen 88% in 2022.

Silvergate has grown from a small community lender to a major crypto bank in recent years and has played a key role in providing services to Sam Bankman-Frieds’ now-collapsed crypto empire.

The group said in an interim fourth-quarter earnings report on Thursday that to cope with customer withdrawals and raise cash, Silvergate rushed to sell $5.2 billion worth of debt securities with a loss of 718 millions of dollars. He added that $150 million of his deposits came from clients who filed for bankruptcy.

The group is cutting 200 employees to accommodate the economic realities facing its business and the cryptocurrency industry, which makes up 40% of its staff, it said Thursday.

He added that he held $4.6 billion in cash and cash equivalents, which exceeds deposits, and $5.6 billion in backed debt to the US government and agencies. Silvergate added that it plans to sell some of the debt in early 2023.

The report did not include a full accounting of the group’s balance sheet or income statement; Silvergate said it will release its full quarterly and full-year earnings report on January 17.

Silvergate is also the subject of intense scrutiny from US lawmakers. Last month, senators including Elizabeth Warren wrote to the bank’s chief executive, Alan Lane, seeking clarification about his role in accepting customer deposits for crypto investment firm Bankman-Frieds, Alameda Research, which the former billionaire said ultimately had to go through the FTX exchange.

Silvergate appears to be at the center of improper transfers of customer funds, the senators wrote, adding that his involvement showed a gross failure.

Silvergate in December defended its role in accepting deposits for Alameda, saying it performed extensive due diligence and when Silvergate received payments intended for Alameda Research and credited them to the account of the same name. This was in accordance with the sender’s instructions. yarn and industry practice.

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