On Thursday, Silvergate Capital Corp reported a sharp drop in fourth-quarter crypto-related deposits, as investors alarmed by the collapse of FTX withdrew more than $8 billion in deposits, sending shares down more than 42%.

The crypto-focused bank also announced that it would reduce its workforce by 40%, or approximately 200 employees, in order to cut costs amid an industry downturn. Its stock was last trading at $12.55 per share.

The dire preliminary earnings report demonstrates the extent of the digital asset industry’s impact from the bankruptcy of crypto exchange FTX, which filed for bankruptcy in November after failing to cover customer withdrawals, marking a stunning turn of fortunes for what was once one of the world’s largest crypto exchanges.

Total deposits from Silvergate’s digital asset customers fell to $3.8 billion at the end of December, down from $11.9 billion at the end of September. To maintain liquidity, the company sold $5.2 billion in debt securities at a $718 million loss in the fourth quarter.

Silvergate previously stated that it had no outstanding loans or investments in FTX, but its stock has lost 69% of its value since the exchange’s meltdown, which triggered a wild crypto sell-off.

On Wednesday, a U.S. attorney told a bankruptcy court that prosecutors had seized U.S. bank accounts at Silvergate and Farmington State Bank, which are affiliated with FTX’s Bahamas-based business, FTX Digital Markets.

According to court records, the accounts at Silvergate Bank and Farmington State Bank, which operates as Moonstone Bank, held approximately $143 million.

Sam Bankman-Fried, the founder and former CEO of FTX, pleaded not guilty on Tuesday to eight criminal counts, including wire fraud and money laundering conspiracy. The 30-year-old is accused of stealing FTX customers’ deposits and using them to fund his Alameda Research hedge fund, purchase real estate, and donate millions of dollars to political causes.

“We are in a period of ‘shoot first, ask questions later’ for any bad news related to crypto and crypto-related businesses,” said Thomas Hayes, chairman and managing member at investment firm Great Hill Capital.

“We expect this carnage to continue for some time as there is no way to value the underlying asset.”

Silvergate, based in La Jolla, California, is also delaying the launch of a blockchain-based payment solution purchased last year from Meta Platforms Inc-backed Diem Group.

The bank said it would take a $196 million impairment charge on assets purchased for the payment solution venture in the fourth quarter.

Total deposits from Silvergate’s digital asset customers fell to $3.8 billion at the end of December, down from $11.9 billion at the end of September. To maintain liquidity, the company sold $5.2 billion in debt securities at a $718 million loss in the fourth quarter.

Several US lawmakers have questioned Silvergate’s relationship with Bankman-crypto Fried’s firms.

Senators Elizabeth Warren, John Kennedy, and Roger Marshall expressed concern in a December letter to Silvergate CEO Alan Lane that Silvergate may have facilitated the transfer of FTX customer funds to Alameda, and requested information on the bank’s anti-money laundering compliance program.

Lane stated on a conference call with analysts on Tuesday that Silvergate “absolutely” adheres to all know-your-customer and Bank Secrecy Act requirements, which require banks to report suspicious activity.

“The misinformation out there is candidly very frustrating,” Lane said. “We follow the Bank Secrecy Act, the USA Patriot Act for every account that we open, and we conduct ongoing monitoring.”

Given the headcount reduction, the impairment charge, and the “future potential for regulatory actions as it relates to FTX/Alameda wires,” “I would imagine Silvergate is definitely exploring strategic options at this point, including a potential merger/sale,” according to Ben McMillan, chief investment officer at IDX Digital Assets.

Silvergate would not say whether it would pursue any strategic options.

On Tuesday, bank regulators in the United States issued a joint statement warning banks of the risks associated with cryptocurrency, adding that they were concerned about the safety and soundness of bank business models that are heavily reliant on cryptocurrency.

Silvergate, which was founded in 1988, entered the cryptocurrency market in 2013. Customers of the bank include major exchanges such as Coinbase Global Inc and Kraken.

The bank also ran a mortgage warehouse businesses, but announced in December that it would be closing it down due to rising interest rates and a drop in mortgage volumes.

(Adapted from Latestly.com)