The New York State Department of Financial Services stated that the closure of Signature Bank was due to a lack of transparency rather than crypto.
State regulators said the bank’s leaders created a crisis of confidence by not supplying reliable and consistent information. The recent comments come after Barney Frank said the move was politically motivated.
Signature Bank crypto business praised by regulators
Additionally, a spokesperson told Bloomberg that Signature Bank’s acquisition of Federal Deposit Insurance Corporation was partially based on the business’s ability to offer services securely and well.
Regulators assumed management of Signature Bank on Sunday, March 12, 2023, after the bank ran into liquidity issues following withdrawals. The bank increased liquidity by selling long-term bonds at a loss as the Fed raised rates.
These statements contradict earlier claims by Signature Bank board member and former Congressman, Barney Frank. Frank alleged in a CNBC interview yesterday that regulators shut down Signature for political reasons.
“I’m shocked. It was not my understanding,” Frank told Bloomberg on March 14, 2023. Barney also said that management felt they were in control when the drawdown ended on March 11, 2023.
Contrary to Frank’s claims, the department commended Signature’s management of its crypto business line.
Crypto venture capitalist Nick Carter cited Frank as one of the sources who claimed the Signature shutdown was politically motivated.
According to other Carter sources, the FDIC was assigned oversight of the bank because its Signet payment network posed a systemic threat to the US economy.
Signature Bank failure started with crypto business, says New York politician
Despite claims that Signature’s failure had nothing to do with crypto, a former director said the bank’s failures came after it moved into crypto and neglected an established business line serving entrepreneurs.
According to New York politician Al D’Amato, “their downfall came when they got into this crypto business.”
The bank branched out into its crypto side business in 2015 by starting a banking relationship with Gemini Trust Company. By the end of 2022, around 20% of the bank’s deposits were from crypto customers. Earlier this year the bank pulled out up to $1.5 billion in deposits, with much of the deposit base not insured by the FDIC.
The leaders of Signature, which regulators say are responsible for the bank’s collapse, have faced scrutiny for associations with former President Trump’s inner circle.
The signee reportedly had business ties to the former president’s family, including Trump’s son-in-law Jared Kushner and attorney Michael Cohen. On January 26, 2021, following the Capitol attack, the bank severed ties with Trump’s associates.
The irony is that Trump signed new laws to allow medium-sized banks like him to hold long-term treasury reserves.
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