Shares in crypto bank Silvergate Capital dive as crisis deepens 

Shares in a crypto bank with ties to disgraced ex-billionaire Sam Bankman-Fried crashed after a ‘crisis of confidence’ caused customers to rush to withdraw their funds.

California-based Silvergate Capital, which offers services including bitcoin-backed lending, said deposits fell to £3.2bn at the end of last year, from £10bn on Sept. 30.

It came as the rapid fall in the value of cryptocurrencies caused markets to panic and high-profile bankruptcies ensued.

“This dynamic has created a crisis of confidence across the ecosystem and has led many industry participants to move to a risk-free position on digital asset trading platforms,” the bank said.

As a result of what it called “economic realities,” Silvergate plans to cut 200 jobs, 40 percent of its workforce.

Boss Alan Lane said the decisions were made to adapt to “rapid changes in the digital asset industry in the fourth quarter,” but that it had enough cash to cover remaining deposits.

Shares plummeted 42.4 percent in Wall Street trading, after falling 88 percent last year.

Silvergate’s troubles are the latest to hit the industry after the collapse of Bankman-Fried crypto exchange FTX in November.

The 30-year-old magnate was arrested in the Bahamas last month before being extradited to the US on charges that he orchestrated one of the largest financial frauds in US history.

He is accused of stealing billions from the exchange’s clients to offset losses at his hedge fund Alameda Research, buying lavish properties and disbursing millions in political donations.

Silvergate has been framed as a major provider of services to the Bankman-Fried empire. Three US senators have written to Lane asking him to clarify his role in accepting deposits for Alameda that Bankman-Fried said would go to FTX.

They wrote that Silvergate appeared to be “at the center” of improper money transfers. The bank said it had conducted “extensive due diligence.”

FTX’s bankruptcy has also raised concerns that contagion could engulf the industry and Silvergate’s rapid decline in deposits means it could be the next company to fail.

During the market turmoil, Silvergate rushed to sell £4.4bn worth of debt securities to bolster its cash reserves.

It holds about £3.9bn in cash and £4.7bn in US government debt, some of which it planned to sell in early 2023.

At the end of last year, it canceled a mortgage product due to rising interest rates and lower mortgage volumes.

Concerns about financial health also seemed to hit others with shares in return Coinbase fell 11 percent.