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- Per reports released Tuesday, Crypto bank Silvergate suffered $1 billion in losses in Q4.
- The reason was massive asset liquidation.
- The bank is under legal troubles with its connection with FTX.
Crypto bank Silvergate Capital is still suffering from the aftermath of the FTX collapse, as it has considerable exposure to the bankrupt crypto exchange. It still couldn’t recover completely as recently, in the fourth quarter reported a net loss of $ 1 billion on Tuesday.
Compared with the net income of $40.6 million for the third quarter, and managed a net income of $18 million in a similar time frame last year. In 2022, the company incurred losses of $949 million, while the net income was $75.5 million in 2021.
Silvergate recently slashed its job force by 40%. The last quarter’s results were foreshadowed by the start of January 2023, when the company had to manage $8.1 billion of outflows for customers’ deposits of digital assets. Another major loss of $8.1 million is expected because of layoffs and will be seen in the first quarter of 2023.
The crypto bank also recorded $134.5 million impairment charges related to $1.7 billion of securities they are expected to sell this quarter as it attempts to counter the huge outflows encountered last year.
Crypto Layoffs
The crypto industry has seen a major layoff period since 2022; more than 27,000 employees were laid off till January 5, 2023. The reasons behind this could be easily linked to Terra ecosystem collapse, FTX implosion, the contagion risk that followed, many entities filing for bankruptcy and the harsh crypto winter.
Still, some crypto recruiters say that engineering and development jobs in the blockchain and crypto industry are still safe and will boom in the coming months and years. With the technology evolving daily and exciting products often coming, the backend programming and engineering staff will have a great run.
Silvergate and FTX
Founded in 1980 in Southern California, started as a normal bank. When Alan Lane became its CEO, the bank slowly shifted its focus entirely to the crypto industry. The bank created a Silvergate Exchange Network (SEN), allowing customers to receive and send USD from Silvergate accounts. In a way, making a crypto-friendly bank account.
This facility made them a perfect choice for crypto exchanges, with many opening their accounts with them and FTX being one of their biggest clients. Its sister company Alameda and associates, had many accounts with the bank. These accounts were illegally used to defraud investors and move their funds, in turn committing fraud.
As Silvergate Capital is still a bank, it comes under strict regulations of the authorities and is bound to report any suspicious activities happening in any account under their watch. Estimates say that almost $80 million plus of funds were moved, though this amount may not be accurate.
This paradigm shift from traditional banking to crypto might have caused once prominent banks to the verge of collapse.
Nancy J. Allen is a crypto enthusiast, with a major in macroeconomics and minor in business statistics. She believes that cryptocurrencies inspire people to be their own banks, and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning. She frequently researches, and posts content on the top altcoins, their theoretical working principles and technical price predictions.
