Less than two weeks before Silicon Valley Bank became the largest bank failure since the 2008 financial crisis, the company’s top executives sold stock worth a total of several million dollars, according to federal disclosures obtained by ABC News.
Former SVB chairman and CEO Greg Becker sold more than $3.5 million of his company’s stock on Feb. 27, according to a disclosure made to the U.S. Securities and Exchange Commission filed on March 1.
Becker was not the only member of SVB to sell common shares in the company. In a separate FEC disclosure, also filed March 1, SVB Chief Financial Officer Daniel Beck sold $575,180 in the company’s common stock on February 27.
ABC News reported this week that the Justice Department and Securities and Exchange Commission are investigating the collapse of Silicon Valley Bank, according to two people familiar with the situation.
The investigations, which are separate, are at a preliminary stage and it is unclear whether any wrongdoing has been committed. It is not unusual after a major public failure of a bank or company for the Department of Justice or the SEC to step in and investigate.
Sources tell ABC News that part of the FBI’s early focus will be to examine whether any of Silicon Valley’s top executives took unusual bonuses or sold stock in the days before the bank’s collapse. In short – there is evidence of insider trading.
The US Department of Justice and the SEC declined ABC News’ requests for comment.
In the days after Becker sold millions of dollars in SVB shares and before the bank collapsed, the then-CEO appeared confident during remarks to an audience of investors, Wall Street analysts and technology executives attending a technology conference at the Palace Hotel in San Francisco. according to a transcript of his remarks obtained by ABC News.
A day after Becker’s reported remarks, SVB reported a $1.8 billion loss on the sale of securities, including Treasuries and mortgages that had lost significant value in the previous year due to an aggressive series of rate hikes by the Federal Reserve. The bank unveiled plans to raise more than $2 billion in a bid to shore up its balance sheet.
According to the New York Times, in the week before Becker’s confident pitch at the tech conference – and then the bank’s eventual collapse – Moody’s had called to tell Becker “the bank’s bonds were at risk of being downgraded to junk.” . That would mean the call came at the same time Becker sold more than $3.5 million of his SVB common stock on Feb. 27.
Asked by ABC News to confirm the call, a Moody’s spokesman declined to comment.
Becker did not respond to multiple ABC News requests for comment. Silicon Valley Bank representatives referred inquiries from ABC News to the Federal Deposit Insurance Corporation.
In the bank’s year-end 2022 SEC annual report filed on February 24, under the section “Credit Risks”, the company wrote: “Due to the credit profile of our loan portfolio, the levels of non-performing assets and charge-offs may be volatile. We have and may in the future be required to make significant allowances for credit losses in any period, which could reduce net income, increase net losses or adversely affect our financial condition in that period. portfolio has a credit profile different from The credit profiles of our customers vary across our loan portfolio, depending on the nature of our lending to different market segments.
Another risk factor, the company disclosed, was that “the interest rate spread may decrease further in the future. Any significant reduction in our interest rate spread could have a material adverse effect on our business, results of operations or financial condition .”
Under the subsection on “Legal, Compliance and Regulatory Risks,” SVB said the same regulations that are now considered not strong enough were so burdensome that they could jeopardize business operations at the company.
“It is subject to extensive regulation that could limit or restrict our operations, impose financial requirements or restrictions on the conduct of our business, or result in higher costs for us, and the stringency of the regulatory framework applicable to us may increase if , as our balance sheet continues to grow,” SVB wrote in its annual report.
“As a holding bank with more than $100 billion in average total consolidated assets, we are subject to strict regulations, including some enhanced prudential standards applicable to large holding companies. If we exceed certain other thresholds, we will be subject to even more stringent regulations,” he added.