Silvergate Bank Suffers Run on Deposits as $8.1 Billion is Withdrawn – Will it Go Bust?

CRYPTO FTX
Last updated:
Author
Ruholamin Haqshanas
Author Categories
About Author

Ruholamin Haqshanas is a contributing crypto writer for CryptoNews. He is a crypto and finance journalist with over four years of experience. Ruholamin has been featured in several high-profile crypto...

Last updated:
Why Trust Cryptonews
Cryptonews has covered the cryptocurrency industry topics since 2017, aiming to provide informative insights to our readers. Our journalists and analysts have extensive experience in market analysis and blockchain technologies. We strive to maintain high editorial standards, focusing on factual accuracy and balanced reporting across all areas - from cryptocurrencies and blockchain projects to industry events, products, and technological developments. Our ongoing presence in the industry reflects our commitment to delivering relevant information in the evolving world of digital assets. Read more about Cryptonews
Image Source: Silvergate 

Silvergate Capital, a crypto-focused bank, suffered a bank run following the collapse of cryptocurrency exchange FTX, which forced the company to sell assets at a significant loss in order to honor $8.1 billion worth of customer withdrawals.

According to a Thursday report by the Wall Street Journal, the crypto bank had to sell $5.2 billion of debt securities it was holding on its balance sheet to cover around $8.1 billion in user withdrawals. As a result, it incurred a $718 million loss, which reportedly exceeds the bank’s total profits since 2013.

Furthermore, the company’s preliminary fourth-quarter results have revealed that it also saw a steep decrease in crypto-related withdrawals, which dropped by 68% in the fourth quarter of 2022. The bank had $11.9 billion worth of deposits from digital asset customers in 2021, which declined to $3.8 billion at the end of 2022. 

Silvergate claimed that it had $4.6 billion compared to its $3.8 billion in remaining deposits at the end of Q4 2022. The crypto bank also holds around $5.6 billion in debt securities like U.S. Treasurys that could be sold quickly. Alan Lane, CEO of Silvergate, said:

“In response to the rapid changes in the digital asset industry during the fourth quarter, we took commensurate steps to ensure that we were maintaining cash liquidity in order to satisfy potential deposit outflows, and we currently maintain a cash position in excess of our digital asset related deposits.” 

As reported, Silvergate has also cut off 40% of its staff, which equals about 200 employees. Apart from this, the bank has dropped plans to launch its own digital currency, writing off the $196 million it spent buying the technology that Facebook had built in its failed attempt to start a crypto-based payments network.

Silvergate describes itself as a “leading bank for innovative businesses in fintech and cryptocurrency.” Now-bankrupt FTX was also a client of the company, which facilitated payments between the crypto hedge fund Alameda and the crypto exchange. It is also under investigation for its role in the FTX saga. 

Crypto Market in Chaos

Aside from Silvergate, some other high-profile crypto companies are also struggling amid the ongoing crypto bear market. For one, crypto brokerage Genesis Global Trading, which recently told clients that they need more time to resolve the financial crisis plaguing its lending business, is considering filing for bankruptcy.

According to a Thursday report by the Wall Street Journal, the company has laid off 30% of its staff as it is dealing with steep losses from loans it made to Bankman-Fried’s now-bankrupt Alameda hedge fund as well as Three Arrows Capital. 

Meanwhile, Alex Mashinsky, the former CEO of now-bankrupt cryptocurrency lender Celsius Networks, is being sued by the New York attorney general for allegedly defrauding hundreds of thousands of investors who deposited billions of dollars into the platform.

More Articles

Bitcoin News
Ex-German Finance Minister Considers Bitcoin in State Reserves and Private Pensions
Veronika Rinecker
Veronika Rinecker
2025-02-11 12:31:54
Bitcoin News
Bitcoin Shows Local Bottom Signals as Miners Enter Capitulation Phase: Analyst
Ruholamin Haqshanas
Ruholamin Haqshanas
2025-02-11 12:01:57
Crypto News in numbers
editors
Authors List + 66 More
2M+
Active Monthly Users Around the World
250+
Guides and Reviews Articles
8
Years on the Market
70
International Team Authors