The Department of Justice and the SEC investigate the collapse of Silicon Valley Bank

WASHINGTON — The Justice Department and the Securities and Exchange Commission are investigating the collapse of Silicon Valley Bank, people familiar with the matter say, after the California lender was taken over by regulators last week amid a historic race on its deposits.

The separate investigations are in their preliminary stages and cannot lead to charges or allegations of wrongdoing. Prosecutors and regulators often open investigations after financial institutions or public companies have suffered large and unexpected losses. Shares in SVB Financial Group,

which was previously owned by the bank, fell 60% last week and has been out of trading since Friday.

The investigations are also looking at stock sales that SVB Financial executives made days before the bank went bankrupt, the sources said. The Justice Department investigation involves the department’s fraud prosecutors in Washington and San Francisco, the people said.

SVB Financial chief executive Greg Becker did not return a phone message seeking comment. The company’s chief financial officer, Daniel Beck, did not immediately respond to a request for comment. Spokespersons for the U.S. Attorney’s Office in San Francisco and the Justice Department’s Criminal Division in Washington declined to comment. A Justice Department spokesperson in Washington did not immediately respond to a request for comment. An SEC spokeswoman declined to comment.

The chief executive of SVB Financial was optimistic days before his bank collapsed, telling a conference last week that it was “the perfect time to start a business”.


patrick t. fallon/Agence France-Presse/Getty Images

Before SVB failed last week and was taken over by the Federal Deposit Insurance Corp., it primarily catered to the island world of startups and the investors who fund them. Its deposits have exploded alongside the tech industry, rising 86% in 2021 to $189 billion.

The bank fell victim last week to a run on deposits. Customers attempted to withdraw $42 billion, or about a quarter of the bank’s total deposits, on Thursday alone. The flood of withdrawals destroyed the bank’s finances. He had made large amounts of deposits in US Treasuries and other government-sponsored debt securities whose market value declined as the Federal Reserve raised interest rates over the past year. .

SVB Financial warned in its latest annual report to investors that its business was heavily focused on lending to new companies in the technology, life sciences and healthcare sectors. “Our lending concentrations arise because our borrowers engage in similar activities that could cause those borrowers to be similarly affected by economic or other conditions,” he said.

Mr Becker was optimistic days before his bank collapsed, telling a conference last week it was “a great time to start a business”. He told another conference last month that the bank’s focus on these sectors did not create the risk of over-concentration, citing different customer specializations and the bank’s business at the time. foreign.

Securities filings show that Mr. Becker and Mr. Beck, the chief financial officer, both sold shares in the week before the bank collapsed. Mr. Becker exercised options on 12,451 shares on February 27 and sold them the same day, earning about $2.3 million.

Mr. Beck sold just over $575,000 of shares on Feb. 27, about a third of his holdings in the company.

Both sales were made under so-called 10b5-1 plans filed 30 days earlier. These plans allow insiders to schedule stock sales in advance to dispel suspicion of trading on nonpublic information. The SEC recently tightened the rules for the plans, which include a 90-day waiting period before sales can be executed. The new rules went into effect Feb. 27, the same day the executives sold.

SVB was the 16th largest bank in the United States, with some $209 billion in assets as of December 31, according to the Federal Reserve. Its collapse, the second-largest bank failure in U.S. history, set off a cascade that threatened to bring down startups and other companies that had parked their money in the bank and hadn’t planned to have access to much of their money.

That changed when the Treasury Department and banking regulators announced they would guarantee all SVB deposits, a move intended to bolster wavering confidence in the banking system.

SVB Financial no longer controls Silicon Valley Bank after regulators took control of the bank on Friday. SVB Financial still has three other operating segments, including investment banking and venture capital arms, which it is seeking to sell or restructure, according to a securities filing made Monday.

SEC enforcement investigations often involve examining whether a company accurately disclosed financial risks or business uncertainties before an adverse event. Law enforcement officials typically review the company’s periodic regulated disclosures as well as management’s statements to investors or analysts on conference calls and in other forums.

SEC Chairman Gary Gensler signaled over the weekend that his agency would be looking for wrongdoing amid a rout of regional banks including SVB, Signature Bank, First Republic Bank and Comerica Bank.

“In times of heightened volatility and uncertainty, we at the SEC are particularly focused on monitoring market stability and identifying and prosecuting any form of misconduct that could threaten investors, the formation of capital or markets more broadly,” Gensler said in a statement on Sunday. “Without speaking to any entity or individual person, we will investigate and take enforcement action if we find violations of federal securities laws.”

Write to Dave Michaels at

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