Silvergate's sees $8 Billion in Withdrawals as Stock Price Drop by More Than 40%
U.S. bank Silvergate, which provides exclusively cryptocurrency services, saw its customers withdraw over $8 billion in the last three months of last year.
This amounted to around two-thirds of the bank's customers pulling their deposits in October, November, and December 2022.
According to a report published by The Wall Street Journal, the bank liquidated debt that it was holding on its balance sheet to keep up with withdrawals, losing $718 million in the process. The loss reportedly surpasses the firm’s profits since 2013. In addition, crypto-related deposits in the firm dropped by 68% in the fourth quarter of last year.
Because of this, Silvergate dismissed around 200 employees, which was 40% of its total personnel. The bank also canceled a plan to launch its own digital currency project, writing off almost $200 million that it paid Facebook to buy the technology it built for the Diem project.
Silvergate’s confirmation of the drop in customer deposits came a day after a United States attorney told a bankruptcy court that U.S. prosecutors had seized bank accounts at the crypto-focused bank and Farmington State Bank. According to the report, court records show that the bank accounts held around $143 million.
Besides the $718 million loss incurred after it was forced to sell debt securities at $5.2 billion, Silvergate reportedly said it would “take an impairment charge of $196 million” on the blockchain-based payment solution it acquired from Diem.
In his conference call with analysts before the release of the preliminary earnings report, Silvergate’s CEO Alan Lane reportedly rejected assertions the bank does not adhere to know your customer and Bank Secrecy Act requirements.
“The misinformation out there is candidly very frustrating. We follow the Bank Secrecy Act, the USA Patriot Act for every account that we open, and we conduct ongoing monitoring,”
Lane reportedly said.
Meanwhile, at the time of writing, Silvergate’s after-hours (07:59 PM EST) share price was $11.93.