US Senator: Signature Bank Collapsed Because It Embraced Crypto Customers Without Sufficient Safeguards
01:26 Mar, 17 2023
U.S. Senator Elizabeth Warren alleges that Signature Bank failed because it “bought into its get-rich-quick narrative” and “embraced crypto customers with insufficient safeguards.” Emphasizing that the bank took “excessive risk,” the senator demanded answers from the CEO of Signature Bank regarding “the economically disastrous outcomes you created.”
Senator Elizabeth Warren’s Letter to Signature Bank’s CEO
U.S. Senator Elizabeth Warren (D-MA) has attributed the failure of Signature Bank to its acceptance of crypto customers without having sufficient safeguards, Yahoo Finance reported Thursday. Signature Bank was seized by the New York State Department of Financial Services last Sunday, becoming the third-largest bank in the U.S. to fail.
In a letter to Signature Bank CEO Joseph DePaolo, Senator Warren wrote:
You owe your customers and the public an explanation for the economically disastrous outcomes you created: you worked hard to weaken the rules, promised that they ‘bode well’ for your bank — and then destroyed it with bad decision-making and excessive risk-taking.
“Congress and the public must learn the lessons from the failure of Signature Bank,” the senator stressed.
The lawmaker argued that Signature Bank supported efforts to curtail capital requirements stipulated in the Dodd-Frank Wall Street reform law, the publication conveyed, adding that the bank also directed thousands of dollars in campaign contributions to leaders of efforts to relax bank regulation in Congress.
“Despite assurances made to Congress that mid-sized banks like Signature Bank would be able to manage risk independently, it has since become clear that your bank was wholly unequipped to do so, and that failure resulted in the bank being shut down and taken over by government regulators,” the senator told DePaolo.
Signature Bank Allegedly ‘Embraced Crypto Customers With Insufficient Safeguards’
Senator Warren further alleged that Signature Bank took on “excessive risk” to boost its bottom line by serving crypto clients, such as the Nasdaq-listed crypto exchange Coinbase, blockchain infrastructure platform Paxos, and collapsed crypto exchange FTX. By December last year, crypto clients accounted for about 30% of Signature Bank’s total deposits. Warren stated:
Signature Bank bought into its get-rich-quick narrative … Signature Bank was caught short because it embraced crypto customers with insufficient safeguards.
According to Bloomberg, the U.S. Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were already investigating Signature Bank’s work with cryptocurrency clients before regulators took possession of the bank last Sunday. The news outlet noted that the DOJ was focusing on whether the bank had taken adequate measures to identify potential money laundering activities by its clients.