US justice department probes SVB’s collapse

US prosecutors are investigating the collapse of Silicon Valley Bank after a dramatic outflow of customer deposits from the Californian tech lender led to the biggest US bank failure since the global financial crisis, according to a person familiar with the matter.

The Securities and Exchange Commission has also launched an investigation into the lender’s collapse, according to media reports. The investigations, which were first reported by The Wall Street Journal, include looking into stock sales made by SVB staff in the days leading up to the lender’s fall, the reports said.

On February 27, less than two weeks before regulators closed SVB, Gregory Becker, the bank’s chief executive, exercised options on 12,451 shares at a cost of $105.18 and immediately sold them at prices ranging from $285.27 to $289.05, according to SEC filings. SVB’s chief financial officer Daniel Beck sold 2,000 shares at $287.59 on the same day, documents show.

Both transactions were executed under what is known as a 10b5-1 trading plan, which allows officers to divest stock based on a pre-determined schedule filed with the SEC without violating insider trading rules. The scheme had been adopted in January.

The Department of Justice’s probe into the implosion of SVB is at an initial stage and may not result in charges. Gary Gensler, SEC chair, said in a statement on Sunday: “Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.”

The DoJ declined to comment. SVB and the SEC did not immediately respond to a request for comment.

The probes come as US regulators scramble to contain fallout from the SVB debacle and to stave off fears of contagion throughout the banking sector.

The Federal Reserve on Sunday announced an emergency lending facility that would provide additional funding to eligible lenders in order “to help assure banks have the ability to meet the needs of all their depositors”.

The steps came after a fraught weekend in which regulators searched frantically for a potential acquirer for SVB. Top private investment groups are now considering buying loans from the bank’s $74bn book.

SVB’s collapse was preceded by the voluntary liquidation of crypto-focused lender Silvergate last week. US regulators on Sunday announced the closure of a third institution, Signature Bank.

Articles You May Like

Boris Johnson broke rules over hedge fund behind Venezuela trip, says watchdog
Jeremy Hunt targets further 2p cut in national insurance
Nvidia drops 10% as investors see risk in Big Tech shares
20 bond financings with the largest volume in March 2024
Hedge fund Citadel to expand its London office space with tower move