Report: Silicon Valley Bank Collapse Triggers DOJ and SEC Investigations

The collapse of Silicon Valley Bank (SVB) has triggered two federal investigations, one by the Department of Justice (DOJ) and the other by the Securities and Exchange Commission (SEC), according to a Wall Street Journal report.

The Wall Street Journal reported Tuesday that “people familiar with the matter” had indicated both the DOJ and the SEC were conducting separate investigations in the aftermath of the bank’s collapse, noting it is a common practice for authorities to “open investigations after financial institutions or public companies suffer big, unexpected losses.”

Both investigations are reportedly looking into sales of SVB stock by management just “days before the bank failed,” with DOJ “fraud prosecutors in Washington and San Francisco” having taken an interest in the case, per the Journal.

Last week, the institution suffered a “massive run on the ban” after depositors “withdrew $42 billion, leaving the bank with a negative cash balance of $958 million,” forcing the bank to enter a Federal Deposit Insurance Corporation (FDIC) receivership. 

The Associated Press noted SVB was once the 16th-largest bank in the United States and a major financial hub of the technology sector. Its fall into insolvency was the second-largest bank failure in American history.

The Journal noted investigations are in their “preliminary phases and may not lead to charges or allegations of wrongdoing.”

The FDIC announced in a statement “All insured depositors will have full access to their insured deposits no later than Monday morning.” However, uninsured depositors, those whose accounts held funds in excess of the $250,000 coverage cap, “would receive a receivership certificate for the remaining amount of their uninsured funds.” 

The statement noted that at the end of 2022, the bank held $175.4 billion in customer deposits but “the amount of deposits in excess of the insurance limits was undetermined” at the time the bank closed.

The uncertainty around when and whether companies will be able to access uninsured funds has sent ripples through the technology ecosystem and the broader economy. 

A March 12 statement by SEC chair Gary Gensler read: 

In times of increased volatility and uncertainty, we at the SEC are particularly focused on monitoring for market stability and identifying and prosecuting any form of misconduct that might threaten investors, capital formation, or the markets more broadly. Without speaking to any individual entity or person, we will investigate and bring enforcement actions if we find violations of the federal securities laws.

Federal Reserve Chair Jerome Powell announced Monday the central bank will pursue a “thorough, transparent, and swift review” of the San Francisco Federal Reserve Bank’s oversight of SVB.

You can follow Michael Foster on Twitter at @realmfoster.