Silvergate Bank, which is currently facing a class action lawsuit over its dealings with FTX and Alameda Research, announced a $1 billion net loss attributable to common stockholders in the fourth quarter of 2022.
in a report Published by the United States Securities and Exchange Commission (SEC), the digital asset bank highlighted that it saw significant deposit outflows in the last quarter of 2022 and took steps to maintain cash liquidity, including wholesale funding and sale of debt securities.
The company also highlighted a “transformational shift” in the digital asset space. He noted that an ecosystem-wide crisis of confidence led clients to take a “risk free” position on cryptocurrency trading platforms.
According to the report, the average digital asset customer deposits in the fourth quarter of 2022 was $7.3 billion. This is significantly lower compared to the third quarter of 2022, where deposits were around $12 billion.
Despite the losses, the company said it is taking steps to prepare for a sustained period of lower deposits. According to the announcement, Silvergate is managing its spend base and evaluating its product portfolio and customer relationships.
Amid the challenges, Silvergate CEO Alan Lane stressed that the company still believes in the digital asset industry and remains “committed to maintaining a highly liquid balance sheet with a strong capital position.”
Related: Silvergate hit with another class action lawsuit, this time for securities law violations
On January 5, the company laid off some 200 employees, representing approximately 40% of its workforce, as part of its efforts to stay afloat. In addition, the company also shelved plans to launch a digital currency project, writing off $200 million used to buy technology developed by Facebook.
In reaction to the situation, the rating firm Moody’s Investors Service downgraded its rating of Silvergate Bank. The rating went from Baa2, which was “low-medium grade”, to Ba1, which is considered “garbage”. Apart from this, Moody’s also noted that the outlook for both Silvergate Capital and its bank is negative.
