Justice Department, SEC probing collapse of Silicon Valley Bank: Sources

(WASHINGTON) — The Justice Department and Securities and Exchange Commission are probing the collapse of Silicon Valley Bank, according to two people familiar with the situation.

The probes, which are separate, are in the preliminary stages and it is not clear whether any wrongdoing has been committed. It is not uncommon after a large public collapse of a bank or company for the Justice Department or SEC to step in and investigate.

The Justice Department and SEC both declined to comment. The news of the probes was first reported by The Wall Street Journal.

In a statement Sunday, SEC Chair Gary Gensler said the agency was 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,” he said.

SVB Chief Executive Officer Greg Becker did not return ABC News’ request for comment.

Silicon Valley Bank, the 16th-largest bank in the country, failed on Friday and was taken over by the Federal Deposit Insurance Corporation, after a run on the bank Wednesday with customers withdrawing $42 billion in deposits by the end of Thursday. SVB mostly served technology workers and startups, including some of Silicon Valley’s biggest names, such as Roku.

The Federal Reserve, Treasury Department and FDIC said on Sunday that additional funding will be available to make sure all deposits both insured and uninsured will be paid.

Also on Tuesday, shareholders sued Signature Bank and three of its former top executives, alleging the New York bank declared itself financially healthy in the days before it was seized by state regulators. Signature Bank, the 29th-largest bank in the U.S., closed its doors Sunday, suggesting the financial panic had spread.

Signature Bank “misrepresented and failed to disclose” adverse facts, according to the lawsuit.

“Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (1) Signature Bank did not have the strong fundamentals that it represented itself as having in the days immediately prior to its takeover, or otherwise took action that left it susceptible to a takeover by the New York Department of Financial Services; (2) as a result, it became a target for regulatory action by the DFS, and (3) as a result, Defendants’ public statements were materially false and/or misleading at all relevant times,” the lawsuit said.

The lawsuit was filed in Brooklyn federal court by the Rosen Law Firm, the same firm that sued Silicon Valley Bank on Monday. It seeks unspecified damage.