The U.S. Department of Justice and the Securities and Exchange Commission (SEC) have reportedly launched an investigation into the bankruptcy of the Silicon Valley Bank (SVB), which has strained the global financial market as well as the U.S. The focus is expected to be on how management identified and dealt with the possibility of insolvency and whether there are any problems with their stock sales before bankruptcy.
The Wall Street Journal said on the 14th that the Ministry of Justice began an investigation into the bank through prosecutors in Washington and San Francisco, and the SEC is also looking into the situation and the possibility of illegal activities by management of SVB. Financial authorities in Massachusetts, which has several stores of Silicon Valley Bank, based in Santa Clara, California, have also launched an investigation. The Securities and Exchange Commission also decided to investigate signature banks that were closed two days after Silicon Valley Bank collapsed. The survey is expected to look into the entire process of the bank’s collapse.
One of the focus of the investigation is whether there is no illegality in the sale of shares by executives on the verge of bankruptcy. Greg Becker, CEO of SVB, was found to have earned $2.3 million in profits from 12,451 shares earned from stock option exercise on the 27th of last month. Chief Financial Officer Daniel Beck also sold $575,000 worth of shares in the company on the same day.
They kept the regulation that the sale of their shares must be formally reported 30 days in advance. The regulation is intended to prevent insider stock trading using undisclosed information. The day when the two sold stocks was the day when the regulation was strengthened from 30 days ago to 90 days ago. Authorities will investigate how the two understood the company’s management situation and what they said about it.
“It’s a great time to start a company,” Becker said at a conference in San Francisco on the 7th, two days before the massive withdrawal (bank run) of $42 billion, and the future of Silicon Valley Bank with technology companies is bright. However, the bank announced the following day that it would sell its bonds at the expense of losses to cope with the deterioration of its financial structure, which eventually led to great confusion.
