Signature Bank Faced Criminal Probe in the US Before Collapse: Report

The US Justice Department was investigating Signature Bank for its dealings with cryptocurrency clients before the New York regulators decided to shuttering the bank last weekend.
Justice Department Probed Signature Bank

According to a Bloomberg report on Wednesday, the US prosecutors in Washington and Manhattan were explicitly concerned about lapses in the anti-money laundering practices of the New York bank. The report outlined that the investigators were looking if the bank properly scrutinized its clients while onboarding and if it monitored transactions for suspicions of criminality.

Additionally, the <a href=”https://www.financemagnates.com/terms/s/securities-and-exchange-commission-sec/” class=”terms__main-term” id=”3718b4df-fc5f-479a-861e-f52759439c15″ target=”_blank”>Securities and Exchange Commission (SEC</a>), the agency that only brings civil lawsuits, was looking into the operations of the collapsed bank.

The reported interest of the federal prosecutors and regulator in <a href=”https://www.financemagnates.com/cryptocurrency/signature-bank-collapse-coinbase-and-paxos-disclose-massive-exposure/” target=”_blank” rel=”follow”>Signature Bank’s operations</a> came after multiple warnings to companies handling clients from the crypto industry and cash related to them. US banks are obligated to report suspicious transactions to federal authorities.

However, neither the US prosecutors nor the securities regulator has brought any official charges against the bank or its employees and even denied confirming the investigation reports. It is also unclear if the findings of the investigation played any role in the abrupt shuttering of the bank.

Fallen US Banks

Signature Bank was known for its <a href=”https://www.financemagnates.com/institutional-forex/signature-bank-crisis-hits-fxcfds-as-gcex-discloses-limited-exposure/” target=”_blank” rel=”follow”>dealings with the cryptocurrency industry</a> and held massive funds from several well-known crypto companies. In addition, the bank offered a blockchain-based real-time settlement system, Signet, which many of its crypto clients used.

However, the New York state regulator shuttered Signature Bank on Sunday “to protect depositors,” putting it under the Federal Deposit Insurance Corporation (FDIC) receivership. It was the third US bank to collapse in four days. Additionally, Silicon Valley Bank went under the FIDC receivership, but the first bank to fold was <a href=”https://www.financemagnates.com/cryptocurrency/silvergate-bank-announces-voluntary-liquidation-amid-troubles/” target=”_blank” rel=”follow”>crypto-friendly Silvergate Bank</a> which announced voluntary liquidation and did not seek FIDC receivership.

The US government will bail out Signature Bank and Silicon Valley Bank, and it has already provided customers access to their deposits, insured or uninsured. Moreover, the Biden administration highlighted that Wall Street, not US taxpayers, will pay for the protection of the two banks’ depositors.

Meanwhile, the federal prosecutors are reportedly investigating the <a href=”https://www.financemagnates.com/cryptocurrency/svb-crisis-circle-escapes-usdc-depeg-with-regulatory-assurance/” target=”_blank” rel=”follow”>collapse of Silicon Valley Bank</a>, primarily on any possible violation of the stock trading rules by the executives. <blockquote class=”twitter-tweet”>BREAKING: Before the collapse of Silicon Valley Bank, executives sold a lot of their shares.Gregory Becker, CEO, sold 11% on Feb 27, 2023.Michael Zucker, General Counsel, 19% on Feb 5.Daniel Beck, CFO, sold 32% on Feb 27.Michelle Draper, CMO, sold 25% on Feb 1.Unusual. <a href=”https://t.co/SFMmpG5dhm”>pic.twitter.com/SFMmpG5dhm</a>— unusual_whales (@unusual_whales) <a href=”https://twitter.com/unusual_whales/status/1634555021487480834?ref_src=twsrc%5Etfw”>March 11, 2023</a></blockquote>Silvergate Bank was facing Justice Department’s probe for its ties with the now-defunct crypto exchange FTX and Alameda Research, putting all three collapsed banks under investigation.