DOJ, SEC Opens Investigations Into Insider Trading at Failed Silicon Valley Bank

Even as the dust settles following the collapse of Silicon Valley Bank, shuttered by the US authorities last Friday, the Securities and Exchange Commission (SEC) and the US Department of Justice have begun investigating the dealings of the bank’s former executives moments before the collapse.

According to sources who shared information with the Wall Street Journal, the investigation seeks to examine whether the top executives of the failed bank illegally dumped stocks before the lender went under. SVB chief executive Greg Becker reportedly sold $3.6 million in stocks a few days before the insolvency, and bought options worth $1.3 million.

The SEC is also running a separate investigation around similar concerns – according to the sources – akin to probes witnessed during the meltdowns of major firms, including those in the cryptocurrency space. The commission, for instance, opened examinations last year when crypto exchange FTX halted withdrawals before filing for bankruptcy. Terraforms Labs, the company behind the failed crypto projects LUNA and UST, is also under the inquiry of the securities watchdog.

Systemic risks

California Department of Financial Protection and Innovation shuttered Silicon Valley Bank Friday, citing systemic risks, marking a major bank failure in the US since the 2008 financial crisis besides Washington Mutual. In a push to protect investors, the financial regulators announced Friday that it would make depositors whole, even those holding above the required insurable threshold of $250,000.

SVB fallout started last week when the startup-centric lender said that it had sold $21 billion in securities, losing $1.8 billion in the process, in a bid to raise quick capital and search for a suitable acquirer.

Meanwhile, cryptocurrencies rallied Tuesday, for the second consecutive day, with Bitcoin up 3% at $24,964, while the second largest digital asset, ether, traded at $1,720, a change of +3% in the past day. The overall crypto market cap has climbed 2% to $1.1 trillion, defying the bearish sentiment.