Crypto Firms Go Under; Fed Warns Of More Scams

Silvergate Capital, a crypto-focused bank, has said total deposits from digital asset customers fell 68% in the last quarter of 2022, to just $3.5 billion from nearly $12 billion.

Photo Insert: The former CEO of Celsius Networks was also sued by the New York attorney general for allegedly defrauding hundreds of thousands of investors who deposited billions of dollars into the platform before it went bankrupt in July.

As of December 31, roughly $150 million of Silvergate's deposits were from customers that have filed for bankruptcy. Silvergate shares fell more than 40% Thursday after the bank said it would lay off 40% of its staff, or about 200 people, CNN Business reported.

The Securities and Exchange Commission (SEC) charged six people in an investment scheme named CoinDeal that raised more than $45 million on false promises of access to blockchain technology. CoinDeal isn't a crypto firm but a scam that people who invested in it didn't know.

The former CEO of Celsius Networks was also sued by the New York attorney general for allegedly defrauding hundreds of thousands of investors who deposited billions of dollars into the platform before it went bankrupt in July.

Crypto lender Genesis Global Trading laid off 30% of its staff and is considering filing for bankruptcy, the Wall Street Journal reported Thursday. Genesis is dealing with steep losses from loans it made to Bankman-Fried's now-bankrupt Alameda hedge fund as well as Three Arrows Capital, which is also bankrupt.

Finally, a little late to the party, US regulators issued the first joint statement warning banks and market participants about the risks of fraud, volatility and shoddy crypto risk management.

"It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system," read the statement issued by the Federal Reserve, the Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency.

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