Silvergate Capital Corp reported a sharp drop in fourth-quarter crypto-related deposits on Thursday and said it would cut its workforce by 40%, or about 200 employees, as withdrawals surged following the collapse of industry major FTX.
Shares in the company, which lost roughly 88% of their value in 2022, were down 40% in premarket trading.
Total deposits from digital asset customers declined to $3.8 billion at the end of December 2022, compared with $11.9 billion at Sept. 30, 2022, the crypto-focused bank said in a preliminary earnings report.
To maintain liquidity, the bank sold $5.2 billion of debt securities at a loss of $718 million in the fourth quarter.
More than a trillion dollars in value was wiped out from the crypto sector last year with rising interest rates exacerbating worries of an economic downturn. The crash has eliminated key industry players such as crypto hedge fund Three Arrows Capital and crypto lender Celsius.
After rapid growth in 2020 and 2021, bitcoin – the most popular digital currency by far – saw broad declines last year, pressuring the crypto industry globally.
The biggest blow to the sector came after major crypto exchange FTX filed for bankruptcy protection in November. Its swift fall has sparked tough regulatory scrutiny of how crypto firms hold funds and conduct business operations.
Silvergate has also been subject to regulatory scrutiny since the FTX crash, as lawmakers rush to create new rules for the largely unregulated crypto industry.
The company had said earlier that it had no outstanding loans or investments in FTX, and that FTX was not a custodian for its bitcoin-collateralized Silvergate Exchange Network leverage loans.
Founded in 1988, Silvergate ventured into crypto in 2013. The La Jolla, California-based bank counts major exchanges like Coinbase Global Inc and Kraken among its customers.
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