Silvergate received a $4.3B bailout after FTX collapse News ▸ US ▸ FTX ▸ Bear Market
Silvergate received a $4.3B bailout after FTX collapse
In the wake of the FTX collapse, withdrawals from Silvergate spiked, and its deposits fell by $3.8 billion at the end of 2022.
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Updated: Jan. 11, 2023 at 7:20 pm UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Silvergate Bank received $4.3 billion from the San Francisco-based Federal Home Loan Bank last year, following the collapse of crypto exchange FTX, according to the firm’s Q4, 2022 flings.
Silvergate’s business model focuses on providing banking services to crypto exchanges and investors. Around 90% of the bank’s deposits come from crypto.
At the end of the third quarter, Silvergate’s 10 biggest depositors, including Coinbase, Paxos, Crypto.com, Gemini, Kraken, Bitstamp, and Circle, represented about half of the bank’s deposits.
As a result of the FTX collapse, Silvergate was in a critical position, as it held deposits for both FTX and Alameda Research.
There were concerns that FTX’s collapse could affect Silvergate and that it would be exposed to bankrupt crypto lender BlockFi. However, in an announcement, Silvergate revealed that its exposure to FTX was limited to deposits.
Further, Silvergate’s CEO, Alan Lane, later reported that the firm had less than 10% exposure to FTX as of September 30. Moreover, according to reports, BlockFi deposits accounted for less than $20 million of the bank’s total deposits.
However, this was not enough to calm the fears of its users. Silvergate users withdrew $8.1 billion worth of digital assets by December 2022. Due to this, Silvergate deposits fell by $4.1 billion to $3.8 billion at the end of December from $11.9 billion on Sept. 30.
The company had to sell its securities and derivatives for a loss of $718 million during the fourth quarter and laid off approximately 200 employees – 40% of its workers.
Nevertheless, the recent loan brings Silvergate’s cash position to $4.6 billion. However, some Twitter users are disappointed with the bailout.
Hysteria. This is wholesale funding at market rates. If you read their update call transcript, you'd know that they marked their entire bond portfolio to market as ATS and it's all US gov debt. They said they'd be selling more to reduce dependence on wholesale funding in Q1
— makesy 🫡 (@0xMakesy) January 11, 2023
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Soumen Datta
Soumen is a dedicated researcher and writer in the field of cryptocurrencies, DeFi, NFTs, and GameFi projects.
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Silvergate
Silvergate is a Federal Reserve member bank and the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry, based in La Jolla, California.
FTX
FTX is a defunct cryptocurrency exchange, currently in bankruptcy proceedings, that was founded by Sam Bankman-Fried and Zixiao “Gary” Wang in May 2019.
BlockFi
BlockFi is a defunct cryptocurrency lender company which is currently in bankruptcy proceedings.
Alameda Research
Alameda Research was once a principal trading firm, operating as an arm of the failed crypto exchange, FTX.
Alan Lane joined Silvergate Bank in December 2008 as director and chief executive officer.