Executives at Signature Bank sold more than $100 million shares after trying to woo cryptocurrency clients.
That’s according to analysis of the failed bank’s filings published Tuesday (April 4) by The Wall Street Journal (WSJ).
The report says sales in the last three years by Signature’s chairman and last two CEOs made up about half the amount. The WSJ notes that all three executives were also members of a committee at the bank that oversaw its risk profile.
The stock sales flew under the radar, the report said, because of how they were filed — with the Federal Deposit Insurance Corp. (FDIC) rather than the Securities and Exchange Commission (SEC), the WSJ said.
Signature Bank was closed down by regulators March 12 after the failure of Silicon Valley Bank (SVB) led to a run on deposits. A week later, the FDIC sold Signature to the New York Community Bancorp-owned Flagstar Bank.
Signature had for years courted the crypto industry. As the WSJ notes, money from digital asset companies helped raise deposits at the bank by 68% in 2021 and led to a 140% gain in the bank’s shares the same year. Insiders made $70 million from selling stock that year, selling double the shares they did the previous year.
Executives sold many of their 2021 shares at around $220, with the stock rising as the year went on, peaking at $366 early last year.
Speaking to the WSJ, Karen Petrou, managing partner at bank-consulting firm Federal Financial Analytics, argued that someone at Signature should have stopped and asked, “‘Do we have the right kind of brakes for this speed? Can we steer the car?”
It’s an argument a number of lawmakers and regulators have been making about Signature and SVB in the last few weeks.
During a Senate hearing last week, officials from the Federal Reserve, FDIC and Treasury Department stressed bank executives’ own culpability in collapses.
“It’s ultimately, in the first instance, the bank management’s responsibility,” testified Federal Reserve Board Vice Chair for Supervision Michael Barr.
And Sen. Sherrod Brown (D-Ohio), chair of the Senate Banking Committee, also blamed the “hubris, entitlement, [and] greed” of bank brass.
“The Fed knew SVB was poorly managed and had big risks and had a higher probability of failure if some shock occurred, yet nothing was done until the bank failed,” he said. “How many other banks are in a similar situation?”