Clients of U.S. bank Silvergate, one of the few listed banking institutions specializing in cryptocurrencies, “withdrawn more than $8 billion from their deposit accounts,” reports the BBC. “Two-thirds of the bank’s customers” closed their accounts in the last quarter of 2022, forcing the bank to sell $5.2 billion in assets.
Silvergate is “the latest casualty of the frightening ‘crypto winter’ that has plagued the industry since last spring” as cryptocurrencies survived the black hole, British public media added. It is also the first financial institution to be affected by the collapse of the FTX cryptocurrency exchange.
Silvergate was just a “handy little bank” before evolving into “a big crypto bank in recent years” and “played a key role in providing services to suspected fraudster FTX founder Sam Bankman-Freed,” explains the Financial Times.
Classic finance splattered
This case “shows how much the regulated financial sector was affected by the collapse of FTX,” the publication adds. Silvergate is listed on Wall Street, and the release of its results on Thursday, January 5, resulted in a “share price drop of nearly 43%.” The bank announced it was laying off 200 employees, or 40% of its payroll, “to ‘take into account the economic realities’ facing the cryptocurrency sector,” its president, Ben Reynolds, explained.
According to The Wall Street Journal, FTX and other companies controlled by Sam Bankman-Freed have invested “about $1 billion” in Silvergate. The FTX bankruptcy scandal in November had already “suddenly lowered stocks” of the bank by “84% in three months.”
Silvergate “is the subject of a thorough investigation” by the authorities, who are trying to find out its relationship with FTX and its subsidiary brokerage company Alameda, the American newspaper recalls. Down to congressional officials holding him accountable: last month, senators (including Elizabeth Warren) demanded clarification about his role in the illegal transfer of funds from FTX’s Alameda accounts.