Less than two weeks before Silicon Valley Bank became the largest bank failure since the 2008 financial crisis, top executives at the company sold stock totaling several million dollars, according to federal disclosures obtained by ABC News.
Former SVB President and CEO Greg Becker sold over $3.5 million of his company stock holdings on Feb. 27, according to a disclosure made to the U.S. Securities and Exchange Commission filed on March 1.
Becker wasn’t the only member of SVB’s top brass to sell company common stocks. In a separate FEC disclosure, also filed March 1, SVB Chief Financial Officer Daniel Beck sold $575,180 in company common stocks on Feb. 27.
ABC News reported this week that the Justice Department and Securities and Exchange Commission are probing the collapse of Silicon Valley Bank, according to two people familiar with the situation.
The probes, which are separate, are in the preliminary stages and it is not clear whether any wrongdoing has been committed. It is not unusual after a large public collapse of a bank or company for the Justice Department or SEC to step in and investigate.
Sources are telling ABC News that part of the FBI’s early focus will be looking into whether any of Silicon Valley’s senior leadership got unusual bonuses or sold stocks in the days leading up to the bank’s collapse. In short–is there any evidence of insider trading.
The U.S. Justice Department and SEC both declined ABC News’ requests for comment.
In the days following Becker’s sale of millions of dollars in his SVB shares and before the bank’s collapse, the then-CEO appeared confident during remarks to an audience of investors, Wall Street analysts and technology executives attending a technology conference in San Francisco’s Palace Hotel, according to a copy of his remarks obtained by ABC News.
One day after Becker’s reported remarks, SVB announced a $1.8 billion loss on the sale of securities, including Treasury and mortgage bonds which had lost significant value over the previous year due to an aggressive series of interest rate hikes at the Federal Reserve. The bank laid out plans to raise more than $2 billion in an effort to shore up its balance sheet.
According to the New York Times, the week before Becker’s confident projection at the tech conference – and then the bank’s ultimate collapse – the rating agency Moody’s had called to tell Becker “the banks bonds were in danger of being downgraded to junk.” That would mean the call came around the same time Becker sold the over $3.5 million of his SVB common stock on Feb 27.
Asked by ABC News to confirm the call, a spokesperson for Moody’s declined to comment.
Becker did not respond to multiple requests from ABC News for comment. Silicon Valley Bank spokespeople directed queries from ABC News to the Federal Deposit Insurance Corporation.
In the bank’s SEC annual report for the end of 2022, filed on Feb. 24, under “Credit Risks,” the company wrote, “Because of the credit profile of our loan portfolio, our levels of nonperforming assets and charge-offs can be volatile. We have and may in the future need to make material provisions for credit losses in any period, which could reduce net income, increase net losses or otherwise adversely affect our financial condition in that period. Our loan portfolio has a credit profile different from that of most other banking companies. The credit profiles of our clients vary across our loan portfolio, based on the nature of our lending to different market segments.
Another risk factor, the company disclosed, was that their “interest rate spread may further decline in the future. Any material reduction in our interest rate spread could have a material adverse effect on our business, results of operations or financial condition.”
Under the subsection for “Legal, Compliance and Regulatory Risks,” SVB said the same regulations now deemed to have been not strong enough were so cumbersome that they could risk business at the company.
“We are subject to extensive regulation that could limit or restrict our activities, impose financial requirements or limitations on the conduct of our business, or result in higher costs to us, and the stringency of the regulatory framework applicable to us may increase if, and as, our balance sheet continues to grow,” SVB wrote in its annual filing.
“As a bank holding company with more than $100 billion of average total consolidated assets, we are subject to stringent regulations, including certain enhanced prudential standards applicable to large bank holding companies. If we exceed certain other thresholds, we will become subject to even more stringent regulations,” it added.