Blumenthal, Warren Seek Comprehensive DOJ & SEC Investigation of Silicon Valley Bank Executives After Bank's Collapse

[WASHINGTON, D.C.] – U.S. Senators Richard Blumenthal (D-CT) and Elizabeth Warren (D-MA) sent a letter to the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC), calling on them to conduct a comprehensive investigation to determine whether senior executives and other key officials involved in the collapse of Silicon Valley Bank (SVB) met their statutory and regulatory responsibilities or violated civil or criminal laws. 

“A series of reports revealed that key SVB officials showed a pattern of risky and questionable decision making that may have contributed to the bank’s instability and collapse and the ripple effects being felt throughout the economy,” wrote Senators Blumenthal and Warren. “The actions of bank executives and other individuals associated with the collapse raised the specter of potential illegal or inappropriate behavior that included self-dealing, failure to meet disclosure requirements and fiduciary duties, insider trading, and more, and your investigation should thoroughly investigate these matters.”

The senators are calling on DOJ and SEC to thoroughly investigate these matters, including: 

• Self-dealing by SVB and its venture capital and startup clients may have been “bribed by the bank into neglecting” risk management.
• Bank officials lobbied Congress for regulatory rollbacks (which they ultimately received) testifying that “SVB … does not present systemic risks,” and that SVB was engaged in “low risk activities.”
• SVB executives received oversize compensation packages and bonuses – and other employees reportedly received bonuses paid out just hours before the bank was taken over by federal regulators.
• In the weeks leading up to SVB’s failure, senior bank executives sold extensive amounts of stock, a move that “add(ed) fuel to the fire” of the SVB bank run. CEO Gregory Becker sold $3.6 million of company shares just two weeks before the crash.
• SVB used “exclusivity clauses,” which limited customers’ “ability to tap banking services from other institutions,” and “made it impossible for those clients to safely diversify where they kept their money.”
• SVB may not have adequately disclosed risks and financial problems in advance of the March 8, 2022 announcement that it would need to raise $2.25 billion to “shore up” its balance sheet – an announcement that precipitated the “wheels start(ing) to come off.”
• The bank’s asset-liability committee reportedly ignored “an internal recommendation to buy shorter-term bonds … (to) reduce the risk of sizable losses if interest rates quickly rose,” and failed to act even as “employees pleaded to reposition the company’s balance sheet into shorter duration bonds.”
• In the days leading up to the collapse, there was a coordinated, “herd-like” activity of venture capital fund leaders and their portfolio companies, including one founder who publicly described his participation in the run on the bank and his attempt to take advantage of the ensuing panic by “buy(ing) shares of SVB at what I consider significantly low prices.”

“One of the enduring failures in the aftermath of the 2008 financial crisis was the inability or unwillingness of DOJ and bank regulators to hold bank executives accountable for behavior that destroyed millions of lives and cost trillions of dollars of wealth. The nation’s bank regulators cannot make the same mistake twice. We are not prejudging this matter, and are not in position to do so. But your agencies have extensive investigative authority and should use it appropriately,” continued the senators.    

The full text of the letter can be found here,

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