On Sunday, New York state regulators shut down one of the biggest cryptocurrency firms, Signature Bank, citing “systemic risk”. An emergency programme was established by the Fed and Treasury to back up all deposits at the bank to contain the losses and avert a bigger disaster.
The closure of Signature Bank, which occurred on March 12, followed those of Silicon Valley Bank and Silvergate Capital (SVB). The banking crisis has led to the already alleged “anti-crypto” US government gaining more control over the crypto market. But the disaster for the bank just has not ended even after its demise.
During the time leading up to its demise, two US Federal agencies were already on the lookout for the bank. Reflecting on the reports on March 15, investigators with the Justice Department in Washington and Manhattan were looking into whether Signature took sufficient steps to identify suspected financial fraud by its customers.
The officials from the Justice Department and Banking regulators have frequently cautioned that companies dealing with cryptocurrency or comparable payments have to be diligent in recognising clients and ensuring that money transfers are for authorised purposes. Any such that brings suspicions must be flagged and reported to the concerned authorities by the bank.
Authorities have revealed that they lost trust in the bank management after it failed to provide “reliable and consistent” data. As none of the bank’s employees has been charged with misbehaviour to date, it is unknown when the inquiry began and whether it resulted in the regulatory closing of the bank. To reduce the possible threats to the market, authorities have been urging banks and other authorised firms to reduce their exposure to cryptocurrencies and other assets.
According to reports, the authorities will investigate the circumstances behind the bank’s failure, particularly looking at the security reports that revealed the sale of SVB shares by the company’s CEO Greg Becker and CFO Daniel Beck two weeks before the bank’s collapse. Although there have been no official statements made, the SEC chair Gary Ginsely promised that they “will investigate and bring enforcement actions if we find violations of the federal securities laws.”
