Just Before Shutdown, Signature Bank Faced Criminal Probe for Money Laundering

A kind of banking crisis emerged last week on Wall Street with Silicon Valley Bank announcing its shutdown. Soon the Fed and the FDIC decided to intervene to protect depositors while also announcing the shutdown of Signature Bank stating that the decision was to stop the contagion from spreading.

However, many in the crypto world have been speculating that this is a targeted attack on crypto-friendly banks by regulators. However, regulators are coming clean on the matter with a spokesperson for the New York Department of Financial Services adding that the decision to take over Signature Bank wasn’t linked to the bank’s crypto businesses.

In a statement, the NYDFS spokesperson said: The decision to take possession of the bank and hand it over to the FDIC was based on the current status of the bank and its ability to do business in a safe and sound manner on Monday”.

The spokesperson said that they worked with executives at Signature Bank to understand its financial position and the ability to meet withdrawal requests from the depositors. However, Signature Bank didn’t provide reliable and consistent data, creating a significant crisis of confidence in the bank’s leadership,” added the spokesperson.

Sources familiar with the matter also told Bloomberg that US prosecutors were investigating Signature Bank’s work with crypto firms before regulators seized the lender. Investigators from the Justice Department from Washington and Manhattan were examining if Signature Bank took sufficient steps to detect any kind of money laundering by its clients.

Two sources familiar with the matter also said that the US Securities and Exchange Commission was also looking into the matter. Spokesperson for neither the bank nor the regulator agencies have commented on the matter so far.

On Sunday, March 12, SEC Chair Gary Gensler gave a statement when authorities decided to bolster US lenders and shut Signature Bank. We will investigate and bring enforcement actions if we find violations of the federal securities laws,” he said.

The bank and its staff haven’t been accused of any wrongdoing. It’s not clear though when were the probes involving Signature Bank were opened and whether this would have any effect on the decision by state regulators.

However, one thing is clear that regulators have been putting a lot of pressure on banks to pull back from servicing crypto firms. Also, post the recent shutdown of two crypto-friendly banks - silverware and Signature - crypto firms are struggling to find new banking partners.

In a recent tweet, Cardano founder Charles Hoskinson wrote: “Crypto needs to de-risk itself from those unstable and volatile banks. The moment we can digitize treasuries, it's game over for banks”.