Insiders of the now defunct Signature Bank reportedly sold more than $100 million worth of stock in the years following the bank’s decision to attract cryptocurrency companies.
According to an analysis conducted by The Wall Street Journal, Signature Bank’s chairman, former chief executive, and successor collectively sold about $50 million in stock over the past three years. The trio, whose sales were about half the amount sold, served on the board committee responsible for monitoring the bank’s risk profile over the past year.
Insider trading
The transactions of bank insiders were shrouded in mystery because they were not clear in official documents, according to WSJ research. noted. The securities rules and deposit method also helped sales go unnoticed.
Signature Bank has been operating for more than two decades and its collapse on March 12 was part of a series of bank closures that also included Silvergate Capital and Silicon Valley Bank (SVB). After embracing the crypto industry during the bull run, Signature’s deposits jumped 68% in 2021.
Additionally, the launch of the bank’s shares recorded a gain of 140% in the same year. WSJ research estimated that insiders made $70 million from stock sales that year. This is double the figure for 2020.
Much of the stock was sold by executives in the spring of 2021 at nearly $220. Importantly, the stock was already in an uptrend, eventually hitting a record high of $366 in early 2022.
While Signature did not directly hold or lend cryptocurrency, an internal payment platform called Signet was used by crypto companies to manage their cash. Signet’s initial plan was sketched out by Signature President Scott Shay, who called himself a “crypto enthusiast,” the report mentions.
Banking disclosures show he sold $5.4 million worth of stock in 2021. He also bought $1.5 million worth of stock during the same period and around $644,000 in 2023, just before the highly publicized collapse. Shay was joined by Joseph DePaolo, the bank’s chief executive, and Eric Howell, its chief operating officer, who sold $13.9 million and $14.9 million of stock, respectively, in 2021. The duo sold an additional $9.2 million worth of stock between them in March 2022.
Additionally, Signature was one of only two S&P 500 companies that did not file insider trades with the Securities and Exchange Commission (SEC).
Regulatory issues
Signature Bank would have been investigation by two US government authorities before its fall. The Department of Justice was investigating whether the company had taken steps to identify potential money laundering by its customers.
Officials were particularly concerned if the bank used preventive measures to monitor transactions for “signs of criminality” and to properly screen account holders. Additionally, the SEC was also reviewing the bank’s transactions, but details of the investigation were not disclosed.
Signature has been placed in receivership by the Federal Deposit Insurance Corporation (FDIC) bidding process for its remaining business operations. Last week, the FDIC issued a notice to the bank’s remaining crypto clients to close all of their accounts by April 5.
The agency now intends to market a $60 billion loan portfolio that primarily includes commercial real estate loans, commercial loans and a small pool of single-family residential loans in the coming months.
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