The US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) have launched investigations into Silicon Valley Bank’s (SVB) failure.
Last Friday, federal regulators took over the bank as customers rushed to pull money out of the bank due to concerns about its viability. Earlier in the day, SVB had announced an attempt to raise capital due to a shortfall – an announcement that only added fuel to the fire.
SVB found itself short of funds as long duration assets declined in value as interest rates jumped as the Fed sought to mitigate inflation.
According to WSJ.com, regulators are looking into reports that said bonuses were paid and shares were sold prior to the bank’s insolvency.
While the share sale was scheduled in advance, as required by law, regulators will be scrutinizing when it became apparent that bank executives understood its dire situation.
An investigation by either entity is not an indication of guilt. While the SEC may pursue civil charges, the DOJ could file criminal charges.
The collapse of SVB has caused heightened concern about the entire banking system. SVB is the second largest bank failure of all time and at the time of its failure the 16th largest bank in the US.