Silvergate has allegedly laid off 200 members of its staff, which is nearly 40% of its total number of employees. The FTX saga has triggered a bank run on Silvergate, making the firm sell off its assets at a loss and cut staff by around 40% to cover $8.1 billion worth of customer withdrawals.
Based on a report published by the Wall Street Journal, the bank managed to bank liquidate the debt that it was holding on its balance sheet to enable it to keep up with withdrawals, losing $718 million in the process. This loss allegedly exceeds the company’s profits since 2013. Additionally, crypto-related deposits in the company have plunged by 68% in the fourth quarter of 2022.
Due to this, Silvergate dismissed nearly 200 employees, which was 40% of its cumulative personnel. Besides that, the bank also canceled a plan to unveil its digital currency project, writing off nearly $200 million that it paid Facebook to acquire the technology it developed for the Diem project.
Despite all that, the bank remains positive in its commitment to cryptocurrency and allegations to have adequate funds to handle a transformation phase. The bank highlighted that it is “taking decisive action” to navigate the current market scenario.
The bank has been under massive scrutiny from United States legislators due to its links to FTX and Alameda Research. On December 6, three US senators wrote a letter to Silvergate to carefully probe the bank’s involvement in client losses as the FTX exchange collapsed.
The firm’s role in transferring FTX client funds to Alameda appears to be a failure on its end in monitoring and reporting all suspicious activities based on the letter.
On December 16, a class-action lawsuit was filed against Silvergate, trying to hold it accountable for its alleged roles in the loss of FTX exchange customer funds. The lawsuit claimed that the bank is liable for its involvement in “furthering FTX’s investment fraud.”