Silvergate Capital has been forced to take drastic action as a consequence of its association with FTX and its collapse.

In addition to paring back its businesses, the bank has laid off roughly 40% of its staff, some 200 employees. Silvergate also wrote off the $196 million it spent on the technology Facebook developed in its attempt to launch its own digital currency. The bank was forced to take these measures due to a recent fire sale from its exposure to FTX.

The collapse of crypto exchange FTX triggered a run on Silvergate of some $8.1 billion in withdrawals. The bank said the withdrawals had been caused by a crypto crisis of confidence. To cover the deposits, the bank was forced to sell assets at a steep loss, which included liquidating the debt on its balance sheet. The $718 million in losses from the sale of the debt, however, far exceeded the bank’s total profits since 2013.

Additionally, crypto-related deposits plunged 68% over the fourth quarter, according to an early release of results expected later this month. They fell to as low as $3.5 billion before rising again to finish the quarter at $3.8 billion. 

Over the last three months, Silvergate share values have shrunk 70%, which has been a very profitable short sell. According to S3 partners, short trades in Silvergate shares were up $400 million last year. Although the stock had rallied on Wednesday, rising 27%, its best percentage gain since 2020, shares fell 40% in early trading Thursday. 

Silvergate’s shares started to decline following the November collapse of FTX, due to the former’s association with the latter. The bank takes the deposits of crypto companies to operate its network linking investors to crypto exchanges. FTX and other Sam Bankman-Fried companies accounted for about $1 billion of the bank’s deposits.

However, unlike FTX, Silverlake was able to survive its solvency crisis through the recent sale of its assets. Almost all of its crypto-related deposits, accounting for 90% of the bank’s total, were kept in cash or liquid securities. Silvergate reported having $4.6 billion and $5.6 billion in debt securities to cover its $3.8 billion in deposits.

Despite its current hardships, the bank said it remains committed to crypto. “While Silvergate is taking decisive action to navigate the current environment, its mission has not changed,” the bank said. “Silvergate believes in the digital asset industry.”

The post Silvergate Cuts 40% Jobs, Writes Off Diem Asset Acquisition appeared first on BeInCrypto.

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