Silvergate Capital Corp. shares plunged after the bank said the crypto industry’s meltdown triggered a run on deposits, prompting the company to sell assets at a steep loss and fire 40% of its staff.
Customers withdrew about $8.1 billion of digital-asset deposits from the bank during the fourth quarter, which forced it to sell securities and related derivatives at a loss of $718 million, according to a statement Thursday. Executives said on a conference call that Silvergate may become a takeover target.
“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows, and we currently maintain a cash position in excess of our digital asset related deposits,” Chief Executive Officer Alan Lane said in the statement.
The collapse of Sam Bankman-Fried’s FTX sparked a crisis for Silvergate, which held deposits for FTX units and Alameda Research, the trading firm at the heart of the crypto exchange’s downfall. Lawmakers are also scrutinizing the bank.
Silvergate plunged 44% to $12.34 at 9:48 a.m. in New York, the steepest decline since the La Jolla, California-based company went public in November 2019. The stock is down 91% in the past 12 months. Signature Bank, which said in December that it intended to shed as much as $10 billion deposits from digital-asset clients, fell 5.8% to $111.05.
Silvergate Capital Corporation operates as a bank holding company. The Company, through its subsidiary Silvergate Bank provides a banking platform for innovators, especially in the digital currency industry, and developing product and service solutions addressing the needs of entrepreneurs. Silvergate Capital serves customers in the United States.
Silvergate once saw the crypto industry as giving it a huge growth opportunity. Over the course of a decade, it transformed itself from a firm catering to small businesses into a publicly traded company known for providing banking services to major crypto clients such as Coinbase Global Inc. and Gemini Trust Co. — as well as FTX and Alameda Research.
At least Solana is on the rise.
Sam Bankman-Fried will go down in history as commiting one of the greatest financial frauds in world history. Why did he have four meetings with Biden’s top staffers prior to FTX’s crash and burn?