Big cat bosses probed on stock sales: US authorities intervene after Silicon Valley Bank collapse
US authorities have stepped in to investigate the collapse of Silicon Valley Bank (SVB) – including whether share sales by the two men who ran the lender broke business rules.
The Justice Department and the Securities and Exchange Commission will investigate the implosion after it was dramatically taken over by U.S. regulators on Friday.
The collapse – the biggest US bank failure since the 2008 financial crisis – was sparked by a plan to raise £1.6billion to make up for big losses that led to a run on the bank.
Probe: The Department of Justice and the Securities and Exchange Commission will investigate the implosion of Silicon Valley Bank after its dramatic takeover by US regulators on Friday
The event sent shockwaves through international markets and caused bank stocks to sell off sharply amid contagion fears.
As well as investigating why the bank collapsed, the probes will examine stock sales that SVB executives made just weeks before it went bankrupt.
Particular attention will be paid to chief executive Greg Becker, 55, and chief financial officer Daniel Beck, 50, who both cashed in millions of shares before his seizure.
The share sales took place on February 27, a fortnight before regulators were forced to step in and take control of SVB.
Becker sold 12,451 shares worth £3million, using a trust he controls. On the same day, Beck sold 2,000 shares worth £472,000.
The timing of the share sales raises serious questions about what the pair knew about SVB’s precarious financial situation.
Becker may not have anticipated the bank run in late February when he sold the shares, but if there were talk of raising more money, analysts believe he could have questions. to answer.
Danni Hewson, analyst at investment platform AJ Bell, said: “The stock sales took place just two weeks before the collapse: this raises serious questions.”
Even before the stock sales, Becker and his executives were making a lot of money from banking.
He earned £8.1m in 2022, Beck was paid £3m and bank chairman Michael Descheneaux took home £3.8m.
Separately, a class action lawsuit has been filed against the company as well as Becker and Beck in California, accusing the bank of covering up how rising interest rates would make the lender “particularly vulnerable” to a bank run.
Questions: SVB chief executive Greg Becker (right) and chief financial officer Daniel Beck (left) both cashed in millions in shares ahead of his seizure
He seeks damages to be awarded to those who invested in SVB between June 16, 2021 and March 10, 2023.
SVB had little to no hedging on rising interest rates despite the tech sector falling on hard times last year.
The Federal Reserve began fiercely raising rates in 2022, making investors less willing to take risks. But SVB terminated rate hedges on more than £11bn of securities throughout the year, according to its annual report.
To make matters worse, the bank was heavily exposed to the bond market, having made large amounts of deposits in US Treasuries whose market value declined as the Fed rose.
Remarkably during this period, the company had no chief risk officer following the resignation of Laura Izurieta in April 2022.
But Becker remained optimistic, telling a technical conference just three days before the bank’s collapse that it was “a perfect time to start a business”.
He said: ‘You can watch agtech [agricultural technology]you can watch fintech, you can watch clean tech, you can watch medical tech [personalised medicine]. There are exciting things in every category.
But it was a dramatic fall from grace for the CEO and the bank, which was hailed in Silicon Valley.
Investors sue Signature Bank
Signature Bank and three former executives are being sued by shareholders.
They accuse the New York lender of fraudulently claiming it was financially sound just three days before its collapse.
The proposed class action lawsuit against Signature and its former chief executive Joseph DePaolo, chief financial officer Stephen Wyremski and chief operating officer Eric Howell has been filed in federal court in Brooklyn.
Founded in 1999, Signature has in recent years made inroads into cryptocurrency but folded on Sunday.
It ended 2022 with £90bn in assets and over £70bn in deposits.