After the sudden collapse of Silicon Valley Bank (SVB) last week, the US Justice Department and Securities Exchange Commission (SEC) have reportedly launched inquiries into the events that led to the bank’s failure. According to sources cited in a report from The Wall Street Journal, the investigations will look into the stock sales undertaken by SVB financial officers in the weeks leading up to the bank’s closure, along with other factors.
SVB’s CEO, Greg Becker, sold $3.6 million worth of shares on February 27, two weeks before the bank’s failure, while CFO Daniel Beck sold $575,180 in stocks on the same day, according to Newsweek. CNBC has reported that SVB executives and directors cashed out $84 million worth of stock over the past two years. These sales were followed by a historic bank run, which led regulators to shutter the bank.
The probes are reportedly in their early stages and may not lead to charges or allegations of wrongdoing. However, another person with direct knowledge of the situation has said that a formal announcement from the Justice Department is expected in the coming days. Cointelegraph has attempted to contact the SEC and the Justice Department for comment but has not yet received a response.
The collapse of SVB has also led to a lawsuit against the bank and two executives, which was filed by shareholders on March 13. The lawsuit alleges that the bank and its executives failed to disclose how rising interest rates would make the bank particularly susceptible to a bank run, and seeks damages for SVB investors from June 16, 2021, to March 10, 2023.
The collapse of SVB has sent shockwaves through the banking and investment communities, and has sparked a wider conversation about the regulation and supervision of financial institutions. The U.S. Federal Reserve is reportedly investigating how it supervised and regulated the now-collapsed financial institution, while SEC chairman Gary Gensler has warned that the regulator will investigate and bring enforcement actions if it finds violations of federal securities laws.
The collapse of SVB may also have implications for the wider cryptocurrency industry, which has had an uneasy relationship with traditional financial institutions during its decade-long existence. SVB was one of the few banks that was willing to work with cryptocurrency firms, which has led to concerns that other banks may now cut off these firms from access to banking services.
In the aftermath of the SVB collapse, some cryptocurrency firms have reported difficulties in accessing banking services, which has led to fears that the lack of access to traditional banking services could drive cryptocurrency firms to operate outside the law or turn to high-risk solutions such as unregulated stablecoins.
Despite these concerns, the cryptocurrency industry is continuing to grow and evolve at a rapid pace. The industry has seen a wave of institutional investment in recent years, with major financial players such as Goldman Sachs and JPMorgan entering the market. While the collapse of SVB may have a short-term impact on the industry, it seems unlikely to halt its long-term growth trajectory.
