Filings with the FDIC reportedly helped Signature Bank’s executives to escape notice from investors and services that monitor insider trades.
The insiders of the now-defunct Signature Bank have reportedly sold over $100 million of shares in the years after the bank shifted its focus to attract cryptocurrency companies.
According to an analysis conducted by the Wall Street Journal, Signature Bank’s chairman, its former chief executive officer, as well as his successor collectively sold around $50 million of shares over the past three years. The trio, whose sales accounted for around half of the amount sold, served on the board committee that was responsible for monitoring the risk profile of the bank over the past year.
Insider Transactions
The transactions by the bank insiders were shrouded with mystery because they were not provided with clarity in the official documents, the WSJ research noted. The securities rules and filing method also helped the sales to 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 surged by 68% in 2021.
Furthermore, the launch of the bank’s shares recorded a 140% gain in the same year. WSJ’s research estimated that the insiders raked in $70 million from stock sales that year. This is twice the figure for 2020.
ADVERTISEMENT
A major chunk of shares was sold by the executives in the spring of 2021 at nearly $220. It is important to note that the stock was already in an uptrend, eventually hitting a record high of $366 in early 2022.
While Signature did not hold or lend cryptocurrency directly, an internal payments platform called Signet was used by crypto companies to manage their cash. The initial blueprint for Signet was sketched out by Signature Chairman Scott Shay, who called himself a “crypto enthusiast,” the report mentioned.
Bank disclosures show that he sold $5.4 million of stock in 2021. He also bought $1.5 million of shares during the same period, and around $644,000 in 2023, just before the high-profile 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 shares, respectively, in 2021. The duo sold another $9.2 million shares between them in March of 2022.
Besides, Signature was one of only two companies in the S&P 500 that did not file insider-trading transactions to the Securities and Exchange Commission (SEC).
Regulatory Troubles
Signature Bank was reportedly being investigated by two US government authorities prior to its fall. The Justice Department was investigating whether the company took necessary measures to identify potential money laundering by its clients.
The officials were particularly concerned if the bank resorted to preemptive measures to oversee transactions for “signs of criminality” and properly vetting account holders. Additionally, the SEC was also looking into the bank’s dealings, but details of the probe have not been revealed.
Signature was placed in receivership by the Federal Deposit Insurance Corporation (FDIC), the process of bidding for its remaining business operations. Last week, the FDIC issued a notice to the bank’s remaining crypto clients to close all their accounts by April 5th.
The agency now intends to market a $60-billion loan portfolio that includes primarily commercial real estate loans, commercial loans, and a small pool of single-family residential loans in the coming months.