Federal authorities have launched an investigation into the collapse of Silicon Valley Bank, multiple outlets reported Tuesday.
The Wall Street Journal first reported that the Justice Department and Securities and Exchange Commission (SEC) are probing the largest bank collapse in the United States since the Great Recession in 2008.
The Federal Deposit Insurance Corporation (FDIC), an independent agency that insures deposits, took over Silicon Valley Bank on Sunday after the California Department of Financial Protection and Innovation closed it following a bank run stemming from liquidity issues.
The collapse happened when the bank did not have enough cash on hand for its customers to withdraw, causing a panic among customers and investors. The Journal reported that customers tried to withdraw $42 million on Thursday, about a quarter of the bank’s total deposits.
Those running to the bank to make withdrawals largely included those with accounts that exceeded the $250,000 per account that the FDIC insures in case of a crash.
The Journal reported that the investigations are in early stages and might not lead to any charges, but the agencies are looking into stock sales that the bank’s financial officers made in the days before the collapse.
The New York Times also independently confirmed the Justice Department and SEC investigations.
The SEC directed The Hill to a statement the agency released on Sunday, saying that it is focused on market stability and prosecuting any form of misconduct that might threaten investors, capital formation or the markets.
“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 SEC said.
The Hill has reached out to the Justice Department for comment. The Hill has also reached out to the law firm Sullivan and Cromwell, which reportedly has been providing legal advice for the bank, for comment.
The Times reported that investigators often look into prearranged plans to sell stocks in cases when those sales occur shortly before a company’s stock price takes a hit.
The Biden administration allowed all who had deposits in the bank to regain access to their money starting Monday as part of a plan to calm markets, and President Biden promised that taxpayers will not pay the costs of any losses.
Source: The Hill
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