The bank was then forced to sell nearly $5.2 billion in assets in order to survive.
The deductions came as a result of three U.S. regulators warning banks that issuing or holding crypto was “highly likely to be inconsistent with safe and sound banking practices.”
Alan Lane, chief executive of Silvergate, told the BBC the bank was selling assets to cover the withdrawals by customers “in response to the rapid changes in the digital asset industry.”
As a bank listed on the New York Stock Exchange, Silvergate is regulated within the financial sector which was significantly affected by the collapse of the FTX crypto exchange.
FTX was once valued at $32 billion before its bankruptcy filing in November and its former head Sam Bankman-Fried has now pleaded not guilty to charges that he defrauded customers and investors.
“Silvergate conducted significant due diligence on FTX and its related entities, including Alameda Research, both during the onboarding process and through ongoing monitoring, in accordance with our risk management policies and procedures.” Read more here: https://t.co/9nAViJOzoi
— Silvergate Bank (@silvergatebank) December 5, 2022
The trial and accompanying controversy has seen bankruptcy filings emerge at other companies and declines in crypto values.
A “crypto winter” has surfaced and has been whipping through the industry since last spring. This has clearly affected Silvergate which acted as a bank for cryptocurrency companies that struggled to get banking services from traditional sources.
Among its most notable clients was the now bankrupt Alameda Research, owned by Bankman-Fried.
Bankman-Fried’s fall from grace has delivered a significant blow to the company in terms of market confidence.
A fall from grace affects crypto confidence
Since the disgraced leader’s collapse, investors of all sizes have been pulling their money out of crypto companies seeing nearly billions transferred from companies that store crypto funds.