Crypto-friendly Signature Bank was facing criminal probe over money laundering concerns ahead of collapse
- DOJ and SEC were said to be investigating Signature Bank’s dealings with crypto clients ahead of its collapse
- Regulators were specifically looking to see if the institution took sufficient steps to detect potential money laundering
- The failed bank was taken over by the FDIC on Sunday
The United States Department of Justice and Securities and Exchange Commission were investigating whether Signature Bank failed to prevent money laundering before the firm collapsed on Sunday.
Federal investigators in Washington DC and Manhattan, New York were specifically looking into the bank’s dealings with cryptocurrency clients, to assess if the institution took sufficient steps to detect potential money laundering, Bloomberg reported, citing unnamed sources.
It is not clear what came of the investigation, but the Federal Deposit Insurance Corporation was forced to take over operations of the bank on Sunday when it could not meet the demands of customers withdrawing their funds.
The bank has never been officially accused of any wrongdoing. DailyMail.com has reached out to the Department of Justice, SEC and Signature Bank for comment.
It comes after recently resurfaced videos show Signature Bank’s executive team singing and dancing as they promoted the new financial institution in the early 2000s, with co-founder Scott Shay triumphantly declaring the bank would never ‘diminish and fail’.
New York-based Signature Bank was facing a criminal probe into its dealings with crypto clients before its collapse on Sunday
The SEC was said to be looking into whether Signature Bank was properly running background checks on its crypto clients and checking their accounts for money laundering
Investigators were said to be looking at the bank’s dealings with cryptocurrency, to assess whether the bank was scrutinizing those who wanted to open accounts and monitoring signs of criminality.
In a statement following the bank’s collapse, SEC Chairman Gary Gensler said: ‘We will investigate and bring enforcement actions if we find violations of the federal securities laws.’
It is unclear when the probe began, but following the collapse of disgraced crypto exchange FTX in November, federal regulators have been pressuring banks and other financial institutions to pull back from crypto to head off potential risks to the financial system.
Former Rep. Barney Frank, who penned landmark legislation following the 2008 global recession to impose new regulations on the banking industry and who served on Signature Bank’s board, has blamed the bank’s failure on its dealings with cryptocurrency.
Speaking to Politico, the former Massachusetts Congressman said: ‘I think, if it hadn’t been for FTX and the extreme nervousness about crypto, that this wouldn’t have happened.
‘And that wasn’t something that could have been anticipated by regulators.’
But on Tuesday, officials with the New York Department of Financial Services — which first shut down the bank — said its decision was not based on the bank’s crypto dealings.
‘The decisions made over the weekend were not crypto-related,’ they said, noting: ‘DFS has been facilitating well-regulated crypto activities for several years, and is a national model for regulating the space.’
The video was their opportunity to promote Signature Bank for the first time after it launched in New York in 2001
The United States Department of Justice building in Washington was examining if Signature Bank took necessary steps to detect money laundering before it collapsed
Signature Bank collapsed on Sunday after just 22 years in business and was taken over by the Federal Deposit Insurance Corporation.
The effects of its demise – and Silicon Valley Bank’s shock collapse – continue to be felt throughout the economy.
After the collapse of SVB Financial and Signature Bank, emergency measures by US authorities had soothed some worries about the health of the other banks, helping regional lenders stage a rebound in Tuesday’s session.
However, some regional banks were giving back their gains in mixed trading midday Wednesday, with shares of First Republic and PacWest down more than 17 percent, but Western Alliance shares rising more than 5 percent.
San Francisco-based First Republic, which has a similar customer base to failed SVB, saw a sharp sell-off after ratings agency S&P downgraded its credit to junk status.