According to sources familiar with the matter, investigators from the Justice Department in Washington and Manhattan were engaged in a comprehensive probe of the crypto dealings of Signature Bank prior to its sudden and unforeseen seizure over the weekend. The focus of this investigation was on the degree of vigilance exercised by the New York-based institution in identifying and neutralizing the risk of illicit money laundering activities perpetrated by its clients. The investigators were reportedly scrutinizing the measures implemented by the bank to screen account holders and monitor transactions for any indication of criminal behavior.
In addition, sources indicate that the Securities and Exchange Commission (SEC) was also conducting a parallel investigation of the bank’s crypto operations, although the specifics of this inquiry remain shrouded in confidentiality. While both the Justice Department and SEC declined to offer any comments, a spokesperson for the latter noted that the agency is prepared to launch civil proceedings if any evidence of violation of federal securities laws is found.
However, it is important to note that neither the bank nor its personnel have been implicated in any wrongdoing, and the investigation may well conclude without any further action. It remains unclear whether the ongoing inquiries into Signature Bank were instrumental in the decision by state regulators to seize the lender. These regulators had previously expressed a loss of confidence in the bank’s management, citing concerns over the institution’s ability to provide accurate and reliable data. Despite repeated attempts to elicit a response from the bank, its remaining operations have remained tight-lipped on the matter. The Federal Deposit Insurance Corp. (FDIC), which has assumed control of the bank, declined to offer any comment on the ongoing investigation.
Repeated warnings from financial regulatory agencies and Justice Department officials have underscored the importance of maintaining a high level of vigilance when handling cryptocurrencies and associated cash flows. It is essential for banks, in particular, to exercise caution and flag any suspicious transactions to the appropriate federal authorities to ensure that money flows are legitimate and comply with regulations.
As Michael Driscoll, the assistant director in charge of the FBI New York field office, pointed out, it is crucial to keep cryptocurrency markets free from illicit activities to safeguard the integrity of financial markets. This comes in the wake of charges being brought against the owner of a cryptocurrency exchange earlier this year.
Regulators have been stepping up their efforts to encourage banks and other regulated firms to exercise greater caution when dealing with digital currencies and other assets, in order to mitigate potential risks to the broader financial system. The recent collapse of Signature Bank, as well as Silvergate Capital Corp and SVB Financial Group’s Silicon Valley Bank, has put all three institutions under scrutiny by US regulatory agencies.
Silvergate, for instance, is reportedly under investigation by the Justice Department over its dealings with Sam Bankman-Fried’s defunct FTX exchange and Alameda Research. Meanwhile, federal prosecutors and the SEC are examining the circumstances surrounding the collapse of Silicon Valley Bank, including whether any stock sales by executives may have violated trading rules. As these developments suggest, banks and other firms operating in the crypto space must remain vigilant and adhere to the highest standards of regulatory compliance in order to maintain the trust of customers and regulators alike.
