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Silvergate shares moved higher on Tuesday after the crypto bank assured investors it is taking steps to weather the FTX collapse despite posting a $1 billion loss in the last quarter of 2022.
Silvergate posted its fourth-quarter results on Tuesday, reporting a net loss of $1 billion for the latest quarter of 2022, compared with a net income of $40.6 million for the third quarter and a net income of $18 million for the same period a year earlier.
The company posted a loss of $949 million for the entirety of 2022, compared with a net income of $75.5 million in 2021. The company’s losses mainly stemmed from asset sales at a steep discount in November last year after it was hit with a wave of withdrawals following the unraveling of FTX.
As reported, Silvergate suffered a bank run following the collapse of FTX, which forced the company to sell assets at a significant loss in order to honor $8.1 billion worth of customer withdrawals.
The crypto bank had to sell $5.2 billion of debt securities it was holding on its balance sheet to cover around $8.1 billion in user withdrawals. As a result, it incurred a $718 million loss, which reportedly exceeds the bank’s total profits since 2013.
Despite the lackluster report, the company’s shares rose as the bank outlined steps it is taking to weather the FTX meltdown. Silvergate said it will shed a portion of its digital-asset product portfolio and assess its pipeline of prospective customers. The bank will also discontinue offering its crypto custody service, CEO Alan Lane said, adding:
“While we are taking decisive actions to navigate the current environment, our mission has not changed. We believe in the digital asset industry, and we remain focused on providing value-added services for our core institutional customers.”
The bank’s shares on the New York Stock Exchange were up 4.9% at $13.85 in premarket trading on Tuesday. However, by the end of the trading day, the company’s shares lost some of the gains, closing the day up by 0.98%.
The bank also laid off 40% of its staff in late 2022ö or about 200 employees. Apart from this, the bank dropped plans to launch its own digital currency, writing off the $196 million it spent buying the technology that Facebook had built in its failed attempt to start a crypto-based payments network.
Silvergate describes itself as a “leading bank for innovative businesses in fintech and cryptocurrency.” However, its main business appears to have been facilitating payments between crypto hedge funds like Alameda and crypto exchanges like FTX.
It is worth noting that the crypto bank is under investigation for possibly facilitating illicit transactions. On December 6, three US senators wrote a letter to Silvergate to probe the bank’s involvement in customer losses as the FTX exchange collapsed.
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