Silvergate Reports $1B Deficit In Q4 2022

A class-action lawsuit is now being brought against Silvergate Bank because of its interactions with FTX and Alameda Research. Silvergate Bank has declared that it expects to report a net loss of $1 billion in the fourth quarter of 2022, which will be due to common shareholders.

The digital asset bank highlighted in a report that was published by the United States Securities and Exchange Commission (SEC) that it saw significant outflows of deposits in the last quarter of 2022 and took actions to maintain cash liquidity, including wholesale funding and selling debt securities. These actions were taken because the bank wanted to ensure that it would continue to have access to cash.

In addition to this, the corporation drew attention to a revolutionary change in the digital asset field. It was pointed out that a crisis of trust had spread across the ecosystem, which caused clients to adopt a “risk off” posture on cryptocurrency trading platforms.

According to the findings of the study, the average value of deposits made by customers of digital assets during the fourth quarter of 2022 was $7.3 billion. When compared to deposits in the third quarter of 2022, which were roughly $12 billion, this figure is much lower.

In spite of the losses, the corporation has said that it is moving forward with plans to be ready for a prolonged period of fewer deposits. The CEO of Silvergate, Alan Lane, emphasized that the firm continues to have faith in the digital asset market and is dedicated to preserving a highly liquid balance sheet together with a solid capital position.

As a part of the company’s attempts to maintain its financial stability, on January 5 it terminated the employment of around 200 of its staff members, which represented approximately forty percent of the total workforce.

In response to the events that transpired, the credit rating agency Moody’s Investors Service cut Silvergate Bank’s rating. The rating dropped from Baa2, which indicates a lower-medium grade, to Ba1, which indicates that the product is “junk.” In addition to this, Moody’s brought attention to the fact that the prognosis for Silvergate Capital and its bank is both pessimistic.