Silvergate cuts off 200 jobs to cover last year’s net losses

Fintech company primarily providing services for cryptocurrency businesses cut nearly 40% of its workforce to cover $8.1 billion of customers’ withdrawals.

As reported by the Wall Street Journal, the company’s decision is primarily related to FTX and BlockFi collapses. Yet, back then, the crypto bank reassured its users that the exposure to both bankrupt firms was minimal. Less than $20 million to BlockFi, and less than 10% to FTX, with the company’s total value locked at $11.9 billion.

Related: Silvergate states minimal exposure to BlockFi

However, according to Q4 Silvergate’s result, the company experienced a 68% increase in crypto-related withdrawals. Silvergate liquidated the debt it held on its balance sheet to satisfy the withdrawal demands. The company lost $718 million in debt sale, far exceeding the bank’s total profits since at least 2013.

Followed by the news of laying off 40% of staff, Silvergate shares fell 40% in the stock market:

Silvergate down 40% pre-market after laying off 40% of employees and seeing a sharp decline in deposits pic.twitter.com/Ny01dJ6rxt

— Bitcoin Data & Analytics (@BTC_DataInsight) January 5, 2023

To stay afloat, the crypto bank backed off the plans to launch its cryptocurrency and called off the $196 million buyout deal of Meta (Facebook) technology, Diem Association. Facebook initially developed the Diem platform for crypto payment purposes.

On January 31, 2022, Diem Association announced Silvergate’s acquisition plans:

We remain confident in the potential for a stablecoin operating on a blockchain designed like Diem’s to deliver the benefits that motivated the Diem Association from the beginning.  With today’s sale, Silvergate will be well-placed to take this vision forward.  Over the coming weeks, the Diem Association and its subsidiaries expect to begin the process of winding down, but we look forward to seeing the design choices – and the ideals – of Diem thrive.

Commenting on the recent news, Silvergate CEO Alan Lane 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.