Everyone Investigating Everything at SVB All at Once

Justice Department, SEC Investigating Silicon Valley Bank’s CollapseThe Justice Department and the Securities and Exchange Commission are investigating the collapse of Silicon Valley Bank, according to people familiar with the matter, after the California lender was taken over by regulators last week amid a historic run on its deposits.

The separate probes are in their preliminary phases and may not lead to charges or allegations of wrongdoing. Prosecutors and regulators often open investigations after financial institutions or public companies suffer big, unexpected losses. Shares in SVB Financial Group, which formerly owned the bank, fell 60% last week and have been stopped from trading since Friday.

The investigations are also examining stock sales that SVB Financial’s officers made days before the bank failed, the people said. The Justice Department probe involves the department’s fraud prosecutors in Washington and San Francisco, the people said.

SEC Charges IT Services Provider DXC Technology Co. for Misleading Non-GAAP Disclosures

The Securities and Exchange Commission today charged DXC Technology Company, an IT services company in Ashburn, Virginia, with making misleading disclosures about its non-GAAP financial performance in multiple reporting periods from 2018 until early 2020.

According to the SEC’s order, DXC materially increased its reported non-GAAP net income by negligently misclassifying tens of millions of dollars of expenses as non-GAAP adjustments for so-called transaction, separation, and integration-related (TSI) costs and improperly excluding them from its non-GAAP earnings. While DXC publicly claimed that its non-GAAP metrics allowed investors “to better understand the financial performance of DXC,” the SEC’s order finds that the company’s non-GAAP disclosure controls and procedures were inadequate to ensure that the company’s expense classifications were consistent with its own public description of TSI costs. According to the order, by misclassifying TSI costs, DXC materially overstated its non-GAAP net income in three fiscal quarters. DXC also failed to evaluate the company’s non-GAAP disclosures concerning TSI costs.

Signature Bank Faced Criminal Probe Ahead of Firm’s Collapse

US prosecutors were investigating Signature Bank’s work with crypto clients before regulators suddenly seized the lender this past weekend, according to people familiar with the matter.

Justice Department investigators in Washington and Manhattan were examining whether the New York bank took sufficient steps to detect potential money laundering by clients — such as scrutinizing people opening accounts and monitoring transactions for signs of criminality, the people said. The Securities and Exchange Commission also was taking a look, two people said, asking not to be named because the inquiries are confidential.

SVB Collapse Exposes ‘Lazy’ ESG Funds as Hundreds Bought Into Doomed Bank

After being caught on the wrong side of Vladimir Putin’s war in Ukraine and the Adani scandal, hundreds of ESG fund managers are now dealing with the sting of having misjudged Silicon Valley Bank.

About 915 funds registered under European Union regulations as either “promoting” ESG or declaring it as their “objective” are exposed — directly or indirectly — to the now-collapsed bank, according to data compiled by Bloomberg.

For ESG investors, SVB appeared to tick several boxes. The bank was a big lender to renewable energy companies, a favorite among ESG managers on the lookout for low carbon footprints. But when it came to governance risks, fund managers seem to have been less attentive.

Citi, Valero, ADT Flag New Investment Risk: the Anti-ESG Effect

Citi, Valero and ADT are telling shareholders that anti-ESG sentiment is a new business risk, as companies start to raise alarms about conservative attacks on socially conscious policies in their annual reports this year.

The bank, oil refiner and home security provider were among 11 companies that directly referenced “anti-ESG” in their 10-Ks for the first time this year, mostly under risk factors, according to a Bloomberg Law review of company filings with the Securities and Exchange Commission. Many of the companies mentioned anti-ESG risks in connection with state government actions and activists.

SEC Is ‘Completely Out Of Control,’ Says a16z Crypto’s Head of Policy

Crypto industry players ramped up the heat towards regulators Tuesday afternoon at the annual Futures Industry Association conference for what they see as failing to provide an adequate regulatory framework for the novel asset class.

Over the past several weeks, regulators such as the Securities and Exchange Commission (SEC) unveiled a slew of enforcement actions against crypto companies in what many industry players view as an hostile attack on crypto and U.S. innovation, saidd Brian Quintenz, a former Commodities Futures Trading Commission (CFTC) commissioner and current head of policy at Andreessen Horowitz (a16z).

“The SEC is completely out of control. They’re going rogue,” Quintenz said.

Short-Seller Citron Deletes All Its Old Tweets, Citing Trolls and LawsuitsCitron Research has deleted all of its old tweets after spending too much time dealing with class-action attorneys and Internet trolls because of them, founder Andrew Left said on Tuesday.

Left, best-known for short positions on Tesla Inc., GameStop Corp. and China Evergrande Group, told Bloomberg by telephone that he was getting “so many” subpoenas for old class-action civil lawsuits off the old tweets that he decided to clean up his Twitter account.

“You can’t do anything good in this world, especially as a short seller you can’t,” Left said. “I get so many trolls from old things, not new things.”

Everything is Securities Fraud

I said above that, as a moral hazard matter, SVB’s executives are out of their jobs and their shares are zeroed, which is a good warning to other risk-loving bank executives. But several of them sold stock just before the failure, so they are not really zeroed, and you can see how that would rub people the wrong way. My own impression is that this is unlikely to be insider trading: SVB’s balance-sheet problems were disclosed and known weeks ago, and I gather that SVB’s executives were as surprised as anyone else by the run last week. But, still, it doesn’t look great.