Silvergate Reports $1B Loss After Crypto’s ‘Transformational Shift’

Crypto-centric bank Silvergate says the industry’s continued downturn led to a $1 billion quarterly loss.

“During the fourth quarter of 2022, the digital asset industry experienced a transformational shift, with significant over-leverage in the industry-leading to several high-profile bankruptcies,” Silvergate Capital Corporation said in a news release Tuesday (Jan. 17).

“These dynamics created a crisis of confidence across the ecosystem and led many industry participants to shift to a ‘risk off’ position across digital asset trading platforms.”

As such, Silvergate says it has decided to cut jobs and taken other actions to stay resilient as it prepares for “what it expects will be a sustained period of lower deposits.”

A big part of the shift the company referred to stemmed from the implosion last November of FTX. As PYMNTS reported in December, Silvergate has addressed its involvement with that company, and its sister firm Alameda Research.

In a letter to the Securities and Exchange Commission (SEC), Silvergate Capital CEO Alan Lane said that the company conducted extensive due diligence on FTX and its affiliates.

“When Silvergate received payments directed to Alameda Research and credited it to the account of the same name, this was consistent with the instructions from the sender of the wire and industry practice,” Lane wrote.

“And, as I’ve noted previously if we detect activity that is unexpected or potentially concerning in any account, we conduct an investigation and, when required, confidentially file a suspicious activity report in accordance with federal regulation.”

Beyond the troubles at FTX, recent weeks have seen a storm of bad news out of the crypto industry. Last week saw several high-profile layoffs, like the ones at digital asset exchange Crypto.com, which is slashing its global workforce by 20%, citing “ongoing economic headwinds and unforeseeable industry events.”

Rival U.S.-based exchange Coinbase also announced a 20% cut to its own workforce last week, the third time the company has lowered its headcount since June.

Silvergate was among a number of crypto-focused banks that saw their deposits fall last year as the digital asset sector suffered a downturn. Still, Lane said Thursday that his company was committed to its mission.

“We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers,” he said. “To that end, we are committed to maintaining a highly liquid balance sheet with a strong capital position.”