A new report says that Signature bank was under investigation by the US DOJ and SEC even before its sudden seizure by the NY state regulator last weekend.
A Bloomberg report on Wednesday, March 15th, citing people familiar with the matter, suggests that the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were probing the bank for anti-money laundering (AML) measures and its connection with crypto clients.
DOJ and SEC Investigations
As reported, the New York Department of Financial Services (DFS) seized the crypto-friendly lender on Sunday, March 12th, citing systemic risks and handed the control over to the Federal Deposit Insurance Corporation (FDIC). The bank had total assets of approximately $110.36 billion and total deposits of approximately $88.59 billion as of December 31, 2022.
The bank had major crypto firms as its clients. This includes Coinbase with $240 million in corporate cash and Paxos Global with $250 million in cash as of March 10th. As of September 2022, almost a quarter of Signature Bank’s deposits came from the cryptocurrency sector.
Signature Bank was one of only seven companies to be included on Forbes’ Blockchain 50 List every year since the inaugural ranking appeared in Forbes in 2019.
Everything looked good for Signature Bank until its collapse. According to Bloomberg, the US DOJ investigators in Washington and Manhattan were examining the bank whether it took adequate measures to detect potential money laundering by its clients. The Justice Department was particularly watching new accounts and looking for signs of criminal activity in transactions.
People familiar also told about a separate probe by the SEC but the details regarding the nature of the probe were not disclosed. This may be related to its crypto clients.
Signature Bank board member Barney Frank, in an interview with CNBC, said that the closure of the bank had all to do with its relations to the crypto industry as regulators wanted to send a very strong anti-crypto message. However, the NYDFS said that the decision had “nothing to do with crypto” but “a significant crisis of confidence in the bank’s leadership.”
SEC and DOJ also Probe SVB Collapse
According to a March 14 Wall Street Journal report, the SEC and DOJ have also launched an investigation to look into events that led to the Silicon Valley Bank (SVB) collapse and insider stock sales.
The particular focus is on the stock sales that SVB officers made days before the bank failed. According to the report, securities filings show that the bank’s CEO Greg Becker and CFO Daniel Beck sold shares two weeks before the bank’s failure.
On February 27th, Becker sold 12,451 shares, netting about $2.3 million. Daniel Beck sold just over $575,000 worth of shares on that same day.
