US Senator: Signature Bank Collapsed Because It Embraced Crypto Customers Without Sufficient Safeguards
US Senator Elizabeth Warren argues that Signature Bank failed because it “bought its get-rich-quick story” and “accepted crypto clients with insufficient guarantees.” Stressing that the bank had taken “excessive risk,” the senator demanded answers from the CEO of Signature Bank regarding the “economically disastrous results you have created.”
Letter from Senator Elizabeth Warren to the CEO of Signature Bank
US Senator Elizabeth Warren (D-MA) attributed Signature Bank’s failure to accepting crypto clients without sufficient guarantees, Yahoo Finance reported on Thursday. Signature Bank was seized by the New York State Department of Financial Services last Sunday, becoming the third largest bank in the US to fail.
In a letter to Signature Bank CEO Joseph DePaolo, Senator Warren wrote:
You must explain to your clients and the public the economic disastrous results you have created: you worked hard to loosen the rules, promised they would be good for your bank, and then ruined it with bad decisions and excessive risk taking. .
“Congress and the public should learn from the failure of Signature Bank,” the senator said.
The lawmaker claimed that Signature Bank supported efforts to reduce capital requirements under the Dodd-Frank Wall Street Reform Act, the outlet reported, adding that the bank also sent thousands of dollars in campaign donations to leaders in congressional banking easing efforts. .
“Despite assurances made to Congress that mid-sized banks such as Signature Bank would be able to manage risk on their own, it has since become clear that your bank was completely unable to do so, and this failure led to the closure of the bank and its takeover. government regulators,” Senator DePaolo said.
Signature Bank Allegedly ‘Captured Crypto Clients with Insufficient Guarantees’
Senator Warren also said that Signature Bank took “excessive risk” to increase its profits by serving crypto clients such as Nasdaq-listed crypto exchange Coinbase, Paxos blockchain infrastructure platform, and failed crypto exchange FTX. By December last year, crypto clients accounted for about 30% of all Signature Bank deposits. Warren stated:
Signature Bank bought into his get-rich-quick narrative… Signature Bank failed because it embraced crypto clients with insufficient guarantees.
According to Bloomberg, the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) were already investigating Signature Bank’s dealings with crypto clients before regulators took over the bank last Sunday. The news outlet noted that the DOJ was focusing on whether the bank had taken adequate steps to detect potential money laundering activities of its customers.
What do you think of Senator Elizabeth Warren’s claim that Signature Bank collapsed because it accepted crypto clients without proper guarantees? Let us know in the comments below.
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