Cryptocurrency

Silvergate received a $4.3B bailout after FTX collapse

Hull Invest

Silvergate Bank received $4.3 billion from the San Francisco-based Federal Mortgage Bank last year, the company said. Q4 2022.

Silvergate’s business model is focused on providing banking services to cryptocurrency exchanges and investors. Around 90% of bank deposits come from crypto.

At the end of Q3, Silvergate’s 10 largest depositors, including Coinbase, Paxos, Crypto.com, Gemini, Kraken, Bitstamp and Circle, accounted for about half of the bank’s deposits.

As a result of the collapse of FTX, Silvergate held deposits of both FTX and Alameda Research, so it was in a key position.

There were concerns that the FTX bankruptcy could affect Silvergate, exposing it to bankrupt crypto lender BlockFi. However, in its announcement, Silvergate clarified that its exposure to FTX is limited to deposits.

Additionally, Silvergate CEO Alan Lane later reported that the company had less than 10% exposure to FTX as of September 30. Furthermore, according to the report, BlockFi deposits accounted for less than $20 million of total bank deposits.

However, this was not enough to assuage users’ concerns. A Silvergate user said that by December 2022 he had withdrawn $8.1 billion worth of digital assets. D.That took Silvergate’s deposits down $4.1 billion to $3.8 billion at the end of December from $11.9 billion on Sept. 30.

The company had to sell securities and derivatives for a loss of $718 million in the fourth quarter and laid off about 200 employees (40% of its workforce).

Nonetheless, recent financings have taken Silvergate’s cash position to $4.6 billion. However, some Twitter users are disappointed with the relief measures.

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