Silvergate Capital crashes 40% after selling assets at a significant loss following FTX collapse

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By Senad Karaahmetovic

Shares of Silvergate Capital (NYSE:SI) are down nearly 40% in pre-market trading Thursday after the bank sold assets at a significant loss to address $8.1 billion in withdrawals, according to a report by the Wall Street Journal (WSJ).

Silvergate confirmed that it “utilized wholesale funding to satisfy outflows.”

The bank sold debt it was holding on its balance sheet at a $718 million loss after its crypto-related deposits tumbled 68% in the fourth quarter, a preliminary earnings release showed. The loss exceeded Silvergate’s total profits since at least 2013.

Furthermore, the earnings results showed that Silvergate slashed its workforce by a whopping 40%, or around 200 employees. The bank also dropped plans to launch its own digital currency, writing off the $196M it spent to buy Diem, Facebook’s blockchain payments network.

The blow comes following the collapse of FTX in November, which sent shockwaves through the crypto industry. Silvergate, which pivoted from traditional banking to focus on serving crypto businesses, manages a network that links investors to crypto exchanges like FTX. The now-defunct crypto bourse accounted for $1B of Silvergate’s deposits.

Silvergate said it held $4.6B in cash on hand as of December 31, which is in excess of deposits from digital asset customers. The bank also said it held another $5.6B in US Treasuries and other highly liquid securities.

Alan Lane, chief executive officer of Silvergate, commented, “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.”