Executives and directors at the recently failed Signature Bank allegedly sold more than $100 million in stock during the crypto boom.
Signature Bank collapsed on March 12 and was taken over by federal regulators, two days after Silicon Valley Bank collapsed.
The failures of Silicon Valley Bank and Signature Bank were the second and third largest bank failures in U.S. history.
Top Signature Executives Accused of Abusing Office For Profit
In a review of company filings with the Securities and Exchange Commission (SEC), the WSJ reported that the sales by Signature’s Chairman Scott Shay, former CEO Joseph DePaolo, and his successor Eric Howell, made up for around half of the total stock sold during that period.All three were part of the risk committee that was responsible for managing the lender’s profile between 2020 and 2022 and were part of the push to back cryptocurrency companies.
The high level insiders are thought to have sold about $70 million in shares in 2021 alone, when Signature Bank was courting cryptocurrency companies, according to the WSJ.
The bank’s new strategy focused on an internal payments platform called Signet, which was used by crypto companies to manage their cash, but Signature did not hold or lend cryptocurrency itself.
The cryptocurrency industry helped boost the Signature Bank’s deposits by 68 percent that year, resulting in a 140 percent rise in the bank’s market value.
The years of 2020 and 2022 saw relatively lower insider sales, with the bank insiders only selling about $12 million and $19 million in shares each year respectively.
Many of the sales occurred in the spring of 2021, when the bank’s stock was priced at about $220, according to the WSJ.
Shay sold $5.4 million in stock in 2021, the same year that DePaolo sold $13.9 million, and chief operating officer Eric Howell sold $14.9 million in shares.
Signature’s value would continue rising until it reached a record high of $366 in early 2022, right before the collapse.
DePaolo and Howell later sold another $9.2 million shares total in March 2022.
However, Signature’s crypto-strategy eventually failed later that year, as some cryptocurrencies imploded in the wake of the FTX collapse, while the price of bitcoin continued to tumble.
This dragged the bank’s shares down with it, with its value falling 64 percent on the year, while its total number of deposits shrank by 17 percent.
Bank Executives Evaded Regulators With Technicalities
Most people said they were unaware of the executives’ behavior due to where they filed the transactions and way they were detailed, according to the WSJ.The insider sales went largely unnoticed because Signature Bank, unlike most other S&P 500 companies, filed documents with the Federal Deposit Insurance Corporation (FDIC) instead of the SEC.
Filings with the FDIC have often evaded discovery by investors and tracking services, said the WSJ.
The another bank registered on the S&P 500 that did not file with the SEC was First Republic Bank, which later needed to be rescued when it nearly failed.
