Shares of cryptocurrency banker Silvergate Capital dived in early trade, after the company reported a steep drop in crypto-related deposits in the fourth quarter. SI stock plummeted 47% in early trading Thursday.
In preliminary forth-quarter results late Wednesday, the La Jolla, Calif.-based bank said it had sold large amounts of assets at a loss. It sold the assets in order to cover $8.1 billion in customer withdrawals. The bank, which ended Wednesday with a market capitalization of $694.9 million, reported a $718 million loss. The loss is tied to debt liquidated in order to cover withdrawals.
Silvergate's digital asset deposits tumbled to $3.8 billion during the fourth quarter. That's down nearly 68% from the $11.9 billion in crypto-related deposits in Q3. The company also laid off 200 employees, or 40% of its head count. Additionally, it says it will streamline its product portfolio to help manage expenses in a "more challenging macro environment."
One of the projects getting axed is the launch of Silvergate's blockchain-based payment solution, which the bank says is no longer imminent. Silvergate will take a $196 million impairment charge in Q4 related to the tech assets purchased from Meta Platforms-backed Diem Group.
As of Dec. 31, Silvergate held $4.6 billion in cash and equivalents. That exceeded their customers' crypto-related deposits, the company says.
Silvergate Capital Fund Seizure
A separate court filing on Wednesday showed a New York federal magistrate had in December ordered the seizure of funds held by Silvergate. The funds are reportedly tied to bankrupt cryptocurrency exchange FTX. Those funds are possibly in the $93 million range, according to data from the Wall Street Journal.
The Silvergate Capital seizure was apparently part of a larger initiative by Federal authorities to subsume assets tied to the FTX collapse. Assets of Robinhood Markets were also targeted. The WSJ reported that portion of the dispute involved 56 million shares, worth about $450 million at the time of publication. FTX founder Sam Bankman-Fried, FTX creditor Yonathan Ben Shimon and bankrupt crypto lender BlockFi have all claimed ownership of the shares in question.
Department of Justice officials believe those assets "are not property in the bankruptcy estate" or subject to exemptions, the WSJ reported.
Robinhood stock dipped more than 3% in Thursday's early morning action.
