Fed and SEC Interrogate Goldman Sachs regarding Purchase of SVB Securities
Goldman Sachs is reportedly under scrutiny by the US Federal Reserve and Securities and Exchange Commission (SEC) regarding its purchase of Silicon Valley Bank’s (SVB) securities before the bank became insolvent. The Federal Reserve and SEC are investigating Goldman Sachs’ actions during SVB’s unsuccessful capital raise before it went under. It is alleged that the US Department of Justice has issued a subpoena to Goldman Sachs as part of the investigation.
The regulators are particularly interested in obtaining documents that prove Goldman Sachs’ dual role in the SVB case. The bank acted as an adviser for SVB’s capital raise and also purchased the bank’s securities portfolio. The investigation is looking into any “improper communications” regarding the sale of the portfolio between Goldman’s trading division and its investment banking division.
Goldman Sachs has stated that it is cooperating with the regulatory bodies.
Before SVB declared bankruptcy, it reportedly hired Goldman Sachs to help raise capital. At the same time, Goldman’s trading division bought SVB’s debt security portfolio at a discount. This strategy of buying a company’s assets and acting as an adviser is not common unless the client is in financial distress. This is not the first time Goldman has used this strategy, as it attempted a similar approach last year when trying to raise funds to purchase crypto lender Celsius’ assets during their insolvency.
Insiders have claimed that Goldman advised SVB to sell part or all of its securities portfolio before the capital raise to demonstrate the need for funding. Former SVB CEO Greg Becker made similar statements during his hearing before the Senate Banking Committee.
However, Goldman has denied providing advice to SVB and instead advised the bank to appoint a third-party financial adviser. SVB filed for bankruptcy on March 10, making it the 16th largest bank in the US with over $212 billion in assets.