Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez (AOC) are digging into Silicon Valley Bank’s (SVB) potential “white glove” treatment of certain depositors.
Stablecoin issuer Circle and bankrupt crypto lender BlockFi were among the 14 firms that received a letter from Warren and Ocasio-Cortez, enquiring about their decision to bank with SVB.
The letter, dated April 9, posed a series of questions to senior executives of firms that had a banking relationship with SVB, including how much money they deposited and maintained at the bank.
In the letter addressed to Circle CEO Jeremy Allaire, and BlockFi CEO Zac Prince, the lawmakers questioned why Circle chose to maintain $3.3 billion worth of assets at SVB. The letter also questioned Allaire on whether SVB offered Circle benefits like lines of credit, or perks to Circle board members, including any trips or conferences.
Warren and Ocasio-Cortez argued that Congress, bank regulators and the public deserve an explanation about SVB’s “hyper-reliance” on firms and investors in the tech industry, and the role these firms might have had in “precipitating the $42 billion single-day-run on SVB.”
In their view, “mutual backscratching arrangements” could help explain why some clients placed massive uninsured deposits at SVB. At the time of its collapse, more than 90% of SVB’s deposits were in accounts that exceeded the FDIC’s insurance limit.
The fallout from SVB’s collapse was felt through the crypto ecosystem, with a number of companies revealing exposure to the bank. Aside from Circle and BlockFi, Ripple, Pantera, Avalanche and Yuga Labs all declared exposure to the bank.
However, by March 13, the FDIC had vowed to protect all depositors of SVB, which largely dispelled most of the concerns.