La Jolla Crypto Bank Silvergate Cuts 181 Local Jobs in Last Quarter

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In an effort to reset its business after a massive run on deposits last quarter, La Jolla-based crypto bank Silvergate Capital cut 181 jobs at its local headquarters.

The bank filed Worker Adjustment and Retraining Notification Act documents with California employment officials detailing the job cuts, which represented 40% of its total workforce.

The layoffs span the entire organization, including underwriting, client services, business development, loan administration, information technology and human resources. About two dozen jobs cut were senior level. The director of credit and the director of anti-money laundering and sanctions were fired, according to the WARN filing.

Throughout 2022, we have been growing the number of employees at a rapid pace in an effort to keep pace with the growth of our business and effectively serve our customers, Silvergate Chief Executive Alan Lane said during a conference call with analysts last week. Since then, it has become clear that we need to manage expenses to take into account the economic realities facing our business and the industry today.

Silvergate, a state-chartered bank, specializes in providing financial infrastructure to the cryptocurrency trading industry. It has been hit in recent months by several crypto industry failures and bankruptcies culminating in the highly publicized collapse of FTX and fraud charges against FTX founder Samuel Bankman-Fried.

FTX and its sister company Alameda Research were Silvergate customers.

U.S. Senator Elizabeth Warren, D-Mass, and two other senators sent a letter to Lane last month raising questions about Silvergates’ guarantees around FTX and Alameda Research accounts.

Lane said last month that Silvergate exercised due diligence and continued monitoring of FTX and Alameda Research accounts at the bank, processing transfers in accordance with sender instructions and industry practices.

Over the past year, Silvergates stock has fallen from the $136 per share range to its closing price of 13.20 on January 13, a decline of 90%.

In the fourth quarter, the bank saw its deposits drop from $11.9 billion to $3.8 billion, a decline of nearly 70%.

Part of the reason we had to cut as deeply as we did on the expense side is a reflection of where deposits settled in the fourth quarter, Lane said.

The bank invested deposits in liquid debt securities, some of which it planned to hold until maturity. Instead, it had to sell quickly to meet withdrawal demands from depositors.

The result was a loss of $718 million in the fourth quarter. It also has unrealized losses of $300 million on a group of government and agency guaranteed securities held for sale.

At the end of the year, Silvergate held total cash and cash equivalents of $4.6 billion, which exceeds the remaining deposits of its crypto customers.

Silvergate plans to take an $8 million charge for severance and job search assistance for laid-off workers. The bank will provide additional details on its financial situation when it releases official fourth quarter results on Tuesday, January 17.

San Diego Union-Tribune staff writer Natallie Rocha contributed to this report.

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