Fed and SEC Probe Goldman Sachs’ Actions in SVB’s Last Days

Federal officials are reportedly probing Goldman Sachs’ involvement in the final days of Silicon Valley Bank.

A report by The Wall Street Journal (WSJ) Thursday (June 15) says that Federal Reserve and the Securities and Exchange Commission (SEC) are investigating the banking giant’s role in acquiring Silicon Valley Bank’s securities portfolio while also working on raising capital for the lender before its collapse.

The report, which cites sources familiar with the matter, says that the U.S. Justice Department has also subpoenaed Goldman for its investigation into Silicon Valley Bank (SVB). The news comes amid a series of larger investigations by federal authorities into the demise of SVB.

The sources said the Fed and SEC want documents that relate to Goldman’s capacity as buyer of the securities portfolio and adviser on SVB’s capital raise for SVB. The goal, the report said, is determine if Goldman Sachs’ investment banking and trading operations held improper communications on the portfolio sale.

“SVB engaged Goldman Sachs to assist with a proposed capital raise and sold the firm a portfolio of securities,” a company spokeswoman told PYMNTS.

“Prior to that sale, Goldman Sachs informed SVB in writing that we would not act as their advisor on the sale, and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial advisor.”

The bank had revealed the probe in a regulatory filing with the SEC last month, saying it was cooperating with and giving information to “various governmental bodies” as they look into the downfall of SVB.

The filing said that investigation includes the bank’s work with SVB “in or around March 2023, when SVB engaged the firm to assist with a proposed capital raise and SVB sold the firm a portfolio of securities.”

After the SVB failed in March and was taken over by the Federal Deposit Insurance Corp. (FDIC), members of California’s congressional delegation wrote to Attorney General Merrick Garland, SEC Chairman Gary Gensler and FDIC Chair Martin Gruenberg, requesting an investigation into the role Goldman Sachs may have played in SVB’s collapse.

The letter came after SVB revealed that Goldman Sachs had served as an adviser as it tried to raise funds to avoid closure and asked the DOJ, SEC and FDIC to determine whether Goldman had kept itself at “arm’s length” while serving in this advisory capacity.

As PYMNTS noted soon after SVB folded — followed by the failure of Signature Bank two days later — new investigations often follow banking crises.

This crisis is no exception. In addition to the SEC’s investigation into Goldman, the regulator is also reportedly examining withdrawals made from SVB before it collapsed to determine if private equity firms executives cashed out their personal accounts at the bank before their clients.