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Odaily Translator | Nian Yin Si Tang
, original author: Max Reyes
Odaily Translator | Nian Yin Si Tang
Silvergate said the losses largely stemmed from forced asset sales following the collapse of cryptocurrency exchange FTX. The bank also said it would eliminate some of its digital asset portfolio and assess the waiting pipeline for potential digital asset clients.to reportAccording to the early Januaryto report, the collapse of FTX triggered Silvergate to be forced to sell assets at a huge loss to handle approximately $8.1 billion in withdrawals. At that time, ARK Fintech Innovationsell off"About 404,000 Silvergate shares were sold, a more than 99% reduction in open interest. JPMorgan also downgrades Silvergate's ratings"from"increase holdings"Downgraded to
neutral
, and cut its price target to $14 from $30.
Crypto-related deposits plummeted 68% in the fourth quarter, the bank said at the time in a preliminary quarterly results report. To process these withdrawals, Silvergate liquidated debt held on its balance sheet. The $718 million lost on the sale of the debt far exceeds the bank's total profits since at least 2013.
However, Silvergate said on Tuesday that the sale resulted in a loss of $751.4 million for the quarter, higher than initially reported.In addition to this, the bank also recorded an impairment charge of $134.5 million related to approximately $1.7 billion in securities expected to be sold in the first quarter of 2023 to reduce borrowings.Silvergate said in early January that it had cut 40 per cent of its workforce, or around 200 staff, and would cut operations. On layoffs, SilvergateExpected restructuring charge of $8.1 million, most of which will be paid during the quarter. The company also shelved plans to launch its own digital currency, which in the fourth quarter
A $196 million impairment charge was taken
, reducing the value of the intellectual property and technology acquired from Diem Group early last year. This revised figure represents a 98% loss compared to the $200 million paid to acquire the assets.
Still, the bank said it remains committed to the crypto industry and has the funds to deal with “an ongoing period of transition.” It is understood Silvergate was able to survive such a sharp drop in deposits because it was structured differently than most banks. It sold most of its traditional banking operations and branches to focus on providing bank accounts to cryptocurrency exchanges and investors. Crypto-related deposits make up about 90% of the bank's total deposits, and almost all of the bank's deposits are in the form of cash or easily marketable securities.Silvergate said it had $4.6 billion in cash on hand at the end of the fourth quarter. In addition, it holds $5.6 billion in bonds, such as U.S. Treasuries, that can be sold quickly. Average daily transaction volumes on the Silvergate network rose in the fourth quarter of last year, the bank said.Separately, the bank was sacked from San Francisco-based Federal Home Loan Bank following FTX's bankruptcy.
Received a $4.3 billion bailout
. Crypto customers among Silvergate's top 10 depositors as of the end of Q3 2022 include Coinbase, Paxos, Crypto.com, Gemini, Kraken, Bitstamp and Circle, accounting for about half of the bank's deposits. FTX and other companies controlled by its founder, SBF, account for about $1 billion of the bank’s deposits, it is reported.
"While we are taking decisive action to address the current environment, our mission has not changed," CEO Alan Lane reiterated in a statement on Tuesday. "We believe in the digital asset industry and we remain focused on delivering Value-added services."
