In an effort to reset its business after a massive run on deposits last quarter, La Jolla-based crypto bank Silvergate Capital has slashed 181 jobs at its local headquarters.
The bank filed Worker Adjustment and Retraining Notification Act paperwork with California employment officials detailing the job cuts, which amounted to 40 percent of its total workforce.
The layoffs span the organization, including underwriting, client services, business development, loan administration, information technology and human resources. About two dozen of the jobs eliminated were senior-level. The chief credit officer and chief anti-money laundering and sanctions officer were let go, according to the WARN filing.
“Throughout 2022, we increased employee headcount at a rapid rate in an effort to keep up with our growing business and serve our customers effectively,” Silvergate Chief Executive Alan Lane said in a conference call with analysts last week. “It has since become clear that we need to manage expenses to account for the economic realities facing our business and the industry today.”
Silvergate, a state-chartered bank, specializes in providing financial infrastructure to the cryptocurrency trading industry. It has been pummeled in recent months by several crypto industry failures and bankruptcies — culminating in the high-profile collapse of FTX and resulting in fraud charges against FTX founder Samuel Bankman-Fried.
Both FTX and its sister firm Alameda Research were customers of Silvergate.
U.S. Sen. Elizabeth Warren, D-Mass, and two other senators sent a letter to Lane last month raising questions about Silvergate’s safeguards around accounts of FTX and Alameda Research.
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The bank provides deposit, payment and security infrastructure to the digital currency industry, which has been reeling from high-profile bankruptcies.
Lane said last month that Silvergate did “significant due diligence” and ongoing monitoring of FTX and Alameda Research accounts at the bank, handling wire transfers per the senders’ instructions and industry practice.
Over the past year, Silvergate’s stock has tumbled from the $136-per-share range to its closing price of 13.20 on Jan. 13 — a 90 percent drop.
In the fourth quarter, the bank saw its deposits plunge from $11.9 billion to $3.8 billion, a nearly 70 percent decline.
“Part of the reasons we’ve had to cut as deep as we have on the expense side is a reflection of where deposits settled out in the fourth quarter,” Lane said.
The bank invested deposits in liquid debt securities, some of which it expected to hold to maturity. Instead, it had to sell quickly to meet depositor withdrawal demands.
The result was a $718 million loss in the fourth quarter. It also has unrealized losses of $300 million on a group of government and agency-backed securities held for sale.
At the end of the year, Silvergate held total cash and equivalents of $4.6 billion, which exceeds deposits remaining from its crypto customers.
Silvergate expects to take an $8 million charge for severance and job-seeking assistance for laid-off workers. The bank will provide additional details of its financial situation when it releases official fourth-quarter results on Tuesday, Jan. 17.
— San Diego Union-Tribune staff writer Natallie Rocha contributed to this report. ◆
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Mike Freeman covers technology for The San Diego Union-Tribune, where his coverage includes Qualcomm, San Diego’s largest publicly traded company. Mike started at the Union-Tribune in 1999, covering the golf and action sports industries. Over the years, Mike has reported on commercial real estate, the housing bubble, banking and defense contractors. He also covered the Pinnfund Ponzi scheme and several real estate scams. He is one of the few journalists in the country who researches and writes a special section on executive compensation. Before joining the Union-Tribune, Mike was business editor of a daily newspaper in Bend, Ore. He graduated from Linfield College in McMinnville, Ore. with a bachelor’s degree in communications.
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