Two members of Congress investigating the alleged “mutual backscratching arrangements” with the now-defunct Silicon Valley Bank questioned executives at the stablecoin issuer Circle and the bankrupt cryptocurrency lender BlockFi.
Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez (AOC) addressed letters to Circle, BlockFi, and 12 other non-crypto tech firms on April 9 asking a series of questions about each firm’s involvement with SVB.
The MPs indicated that further information concerning SVB’s alleged “coddling” and “white glove” treatment of its top depositors is needed to determine whether these firms played a part in SVB’s demise.
Circle and BlockFi CEOs Jeremy Allaire and Zac Prince were questioned about the length of their financial interactions with SVB, the amounts placed with the bank, and what “agreements” were made between their companies.
Furthermore, the couple was curious if SVB provided “perks” such as low-interest rate mortgages or SVB-sponsored “ski trips, conferences, and fancy dinners.”
“Congress, bank regulators, and the public are owed an explanation for the bank’s reliance on tech industry firms and investors,” wrote Warren and AOC.
They also questioned the executives about “the role that companies like yours might have played in precipitating the $42 billion single-day run on SVB.” “Obtaining information on these aspects is critical for understanding why SVB failed and how to avoid a similar failure in the future,” they noted.
Warren and AOC believe it could explain why some customers, such as Circle, made extraordinarily large uninsured deposits at SVB. Circle disclosed $3.3 billion in SVB accounts shortly after the bank’s failure, while BlockFi was discovered to have $227 million in uninsured deposits with the bank.
