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Silvergate Capital Corporation, the parent company of Silvergate Bank, which serviced Sam Bankman-Fried’s now-defunct cryptocurrency empire, is shutting down its mortgage business and cutting 20 % of the workforce as customers invested $8.1 billion in cryptocurrency-related deposits.
Silvergate’s preliminary fourth-quarter earnings report indicated that the company is discontinuing its mortgage warehouse loan product in the fourth quarter of 2022 due to “the current macro environment, rising interest rate environment and associated lower mortgage loan volume.”
As a result, the California-based group had to pay $4 million in the same quarter in “restructuring costs, primarily related to severance and employee benefits,” according to an SEC filing.
Founded in 1988 as an industrial lender, Silvergate began serving companies in the cryptocurrency industry in 1993.
The bank operates a network that connects investors to cryptocurrency exchanges after accepting deposits from companies.
About 90 percent of Silvergate’s total deposits are related to cryptocurrency, with about $1 billion of deposits in the bank coming from other companies controlled by FTX and its founder, Bankmans-Fried, according to the Wall Street Journal.
After rapidly expanding its workforce through 2022, Silvergate recently cut its workforce by 20 percent, or 400 jobs, “to address the economic realities facing the digital assets industry today,” according to filings. Affected employees were notified on January 4.
The group suggested that the fourth quarter of 2022 saw a shift in the digital assets industry, with the industry becoming severely redundant, leading to several high-profile bankruptcies.
Costs related to the layoffs were approximately $8 million, including $6.1 million in severance pay and $1.3 million in employee benefits.
Silvergate’s preliminary earnings report also showed debt sales for cash proceeds to maintain liquidity, including a $5.2 billion debt sale with a loss of $718 million in the fourth quarter of 2022.
Total digital asset customer deposits fell from $11.9 billion on September 30 to $3.8 billion on December 31.
Silvergate CEO Alan Lane said in a statement: “In response to the rapid changes in the digital assets industry in the fourth quarter, we have taken appropriate steps to ensure that we maintain cash liquidity to meet potential deposit outflows, and we are currently in the digital asset-related space. deposits maintain cash positions.
While the group faces scrutiny from US lawmakers who have called for an investigation into Silvergate’s role in accepting deposits from clients of Bankman-Fried’s cryptocurrency firm, the firm said Silvergate’s mission has not changed: It remains committed to cryptocurrency.
The company said it believes in the digital assets industry and will continue to focus on providing value-added services to its core institutional clients.
Reference Source: Housing Wire
