Job Cuts at Silvergate as Crypto-Friendly Bank Winds Down After FTX Collapse
Silvergate Capital, the parent company of now-defunct crypto-friendly bank Silvergate Bank, has announced another major layoff that would impact 230 employees.
In a recent filing with the Securities and Exchange Commission (SEC), the company said it would have just 80 employees left by the end of the week to manage the liquidation of its crypto-friendly bank.
“Additional incremental reductions in headcount are expected to occur on each of June 30, 2023, August 30, 2023 and November 30, 2023 or later,” the filing said.
The La Jolla, California-based company detailed that the remaining employees will “focus on implementing the Bank Liquidation, preserving the residual value of the Company’s assets and addressing the regulatory and other inquiries and investigations that are pending with respect to the Company and the Bank.”
Silvergate added that it's still unable to fulfill its filing obligations, claiming that it doesn’t expect to produce audited financial statements in an effort to minimize costs.
Furthermore, the company said it has sold all of its debt securities, holding funds in excess of what it needs to repay depositors.
Silvergate was among the lenders hit hardest by the fall of FTX in November last year.
As reported, Silvergate suffered a bank run following the collapse of FTX and had to sell $5.2 billion of debt securities it was holding on its balance sheet at a significant loss to cover around $8.1 billion in user withdrawals.
Consequently, it incurred a $718 million loss, which reportedly exceeded the bank’s total profits since 2013.
The bank had only $3.8 billion of deposits at the end of 2022, compared to $11.9 billion in 2021.
Notably, the new wave of layoffs comes as the company let go of another 200 employees earlier this year to navigate a “challenging macro environment.”
Crypto Firms Struggle to Find Banking Partners as Crypto-Friendly Banks Fail
Crypto companies have been struggling to find new banking partners after the recent banking crisis that saw some of the more crypto-friendly banks collapse.
In early March, Silvergate Bank’s parent company, Silvergate Capital Corporation, announced that it has decided to wind down the bank's operations and liquidate its subsidiary.
Just two days after the collapse of Silvergate, SVB Financial Group, one of the most popular lenders to Silicon Valley tech and growth startups, failed after a run on the bank.
During the same time, Signature Bank, another crypto-friendly bank, was shut down by US regulators over systemic contagion fears.
Following the closure of these three of the largest crypto-friendly banks, crypto firms have been left scrambling to find banking partners.
“Regulators don’t like crypto and even the word decentralization makes them nervous, however, they’re not stupid — they’ll know that no amount of opaque legalese and strongarming will make crypto go away,” said Vadim Yarmak, the CEO of blockchain marketing firm PRMR.
“The short-term goal is to keep crypto out of traditional banks so that that the idea of crypto doesn’t become normalized.”