Silvergate Bank Loses $718m in Asset Sell-Off
by Tom Nyarunda
Silvergate bank declared on Thursday that it would fire at least 200 employees besides halting plans to develop a blockchain payments network. The drastic action is a consequence of its association with the recent FTX fiasco.
A Wall Street Journal (WSJ) report stated that the crypto-focused Silvergate Capital Corp experienced a surge in withdrawals following the collapse of FTX. Consequently, the bank was forced to liquidate $5.2 billion in digital assets it held on its balance sheet leading to losses amounting to $718, which exceeded its cumulative profit since 2013.
Silvergate Bank sells assets at steep loss
A corresponding 68% decline in deposits during Q4 2022 saw Silvergate's $11.9 billion deposits slashed to a paltry $3.8 billion on 31 December. The bank has been forced to downsize its workforce and sell off its assets at a steep loss to try and rein in costs amidst the ongoing industry downturn.
The downfall of Sam Bankman-Fried’s FTX, once the world’s second-largest cryptocurrency trading platform, and his subsequent arrest in the Bahamas and extradition to the USU has rattled parts of the banking industry.
The events rippling across the budding sector have eroded some people's confidence in crypto platforms. Silvergate bank is among the institutions bearing the brunt. Crypto brokerage Genesis also seems to have 'caught a similar cold’ as it announced on Thursday of plans to let go more than 60 employees representing at least 30% of its workforce.
Bullish on crypto
The setbacks suffered by Silvergate haven't gone unnoticed by US regulators, with three Senators asking for more information in a letter addressed to the bank last December asking about the extent of customer losses as FTX went under.
The [letter](https://www.warren.senate.gov/imo/media/doc/Letter to Regulators re Banking System Exposure to Crypto.pdf) hints that there may have been a lapse in Silvergate’s capacity to monitor and report suspicious activity. The bank played a significant role in assisting FTX in transferring customer funds to Alameda.
Despite the preceding, Silvergate has remained bullish on digital assets and claims to have sufficient funding to manage a "sustained period of transformation".
The bank stated: “While Silvergate is taking decisive action to navigate the current environment, its mission has not changed. Silvergate believes in the digital asset industry.”
Silvergate bank said it remained committed to crypto and its recent moves were necessary to survive a tumultuous phase in the crypto economy.
Tom is a freelance writer with over 15-years’ experience in content creation, blog writing, and SEO specializing in the blockchain and cryptocurrency niche. He is a philosophical figurehead who believes that to make our world a better place, we must invest in incorruptible products and procedures, of which Bitcoin and other cryptocurrencies are leading examples.