- A former executive of Signature Bank has made several attempts to heap blame for the bank’s failure on digital assets.
- After implementing reckless management policies, Senator Cynthia Lummis criticized the position as a deflationary approach.
- The NYDFS continues to reveal events resulting in the collapse of the bank months after taking over to “protect the US economy.”
As investigations into Silvergate Banks ramp up, discoveries alongside the blame game from different sources come to light.
At a Senate Banking Committee hearing on May 16, Scott Shay, a former executive of Silvergate Bank, gave his statement on the facts leading to the bank’s collapse. From his testimony, he leaned towards putting most of the blame on the bank’s readiness to deal with web3 start-ups rather than on the management team.
He stated that the bank started accepting deposits from digital asset firms in 2018, although the number dropped over the years due to the industry’s high volatility, especially in mid-2022. He further noted that the bank was affected by the fall of “a bank with strong ties to the digital asset sector.”
The authorities asked clients to withdraw their funds leading to a massive $16 billion withdrawal from Signature Bank. After his testimony, Senators evaluated his testimony, with many lashing out at him for the complete failure of the bank.
Senator Cynthia Lummis knocked Shay out for trying to shift responsibility away from his team.
“It looks like there has been a lot of deflection of blame onto those particular depositors that deal in digital assets and onto regulators, but you haven’t accepted any blame yourself,” she said.
Despite referring to digital assets ten times during his testimony, he denied pointing fingers at web3 firms for the bank’s collapse.
Accused of keeping millions
At the hearing, Senator Elizabeth Warren further criticized Shay and Silicon Valley’s CEO Gregory Pecker who are accused of “keeping millions after recklessly crashing banks.”
“Right now, the law says that people like Mr. Becker and Mr. Shay can pay themselves tens of millions of dollars in bonuses and stock options, and when the banks blow up, Mr. Becker and Mr. Shay get to keep all the money. And that is just plain wrong. If we don’t fix it, every CEO for these multibillion-dollar banks will keep right on loading up on risks and blowing up banks, and everybody else is going to have to pay for it.”
Senator Warren also noted that she will work on a bill to curtail the powers of bank executives to receive these “crazy paychecks.”
Recall that in April, the New York Department of Financial Services (NYDFS) said it would be wrong to blame virtual assets for the bank’s collapse but rather on “a new-fashioned bank run.”