Suspicious Stock Sales Days Before The SVB Collapse

Mar 14, 2023

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Both the Securities and Exchange Commission (SEC) and the Justice Department are investigating the collapse of Silicon Valley Bank.

Probes

The collapse of Silicon Valley Bank (SVB) is currently under by the Justice Department and the SEC. Both investigations are in their preliminary stages and may not necessarily result in charges of wrongdoing. The probes are looking into the stock sales made by the executives of SVB Financial Group, the former owners of the bank, prior to the bank’s failure. Massachusetts regulators are also investigating the executives’ trading activities in the 90 days before the bank’s demise.

How To Break A Bank

The California lender was taken over by regulators last week. Several factors lead to the fall of the financial institute. SVB Financial’s deposits rose by 86% in 2021 to $189 billion, in line with the growth of the tech industry. However, the bank’s reliance on lending to the newer companies in technology, life-science, and healthcare industries exposed it to heavy risks from economic conditions. The bank even cautioned investors about this risk in its latest annual report. Moreover, SVB had invested significant amounts of its deposits in US Treasuries and other government-sponsored debt securities. These decreased in value as the Federal Reserve raised interest rates in the past year.

The First To Fall

SVB’s collapse was the result of a historic run on its deposits, with customers attempting to withdraw approximately $42 billion. This accounts for a quarter of the bank’s total deposits. The flood of withdrawals severely impacted the bank’s finances, leading to its collapse.

Unfounded Optimism

SVB Financial’s CEO, Greg Becker, expressed optimism days before the bank collapsed, saying that it was “a great time to start a company.” He cited the bank’s different specialization and international business as evidence that the bank’s focus on lending to technology, life-science, and healthcare industries did not create the risk of too much concentration.

Suspicious Stock Sales

Even though he spoke optimistically about the future, it seems that Becker wanted to make sure that his future will be bright. The SEC filings revealed that Becker and Daniel Beck, the Chief Financial Officer, both sold shares a week before the bank collapsed. Massachusetts regulators are also investigating these suspicious stock sales and what they knew about the bank’s business in the 90 days leading up to its collapse.

The DOJ & SEC are investigating Silicon Valley Bank’s executives' trading, per WSJ.

They sold per trading plans:
– Gregory Becker, CEO, sold 11% on Feb 27, 2023.
-Michael Zucker, Counsel, 19% on Feb 5.
– Daniel Beck, CFO, 32% on Feb 27.
– Michelle Draper, CMO, sold 25% on Feb

— unusual_whales (@unusual_whales)

The Investigation

The SEC is investigating whether SVB accurately disclosed its financial risks or uncertainties before the collapse. This is a standard procedure in case of such negative events and being the second-largest bank failure in US history, this is surely worth the attention of the regulators.

Speaking of which, there is another authority that is greatly interested in what was going on at the bank before the final days. The Justice Department also started its own investigation. According to insiders the probe involves the department’s fraud prosecutors.

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