Circle & BlockFi Under Scrutiny in SVB Investigation by Warren & AOC
- Warren and AOC question Circle and BlockFi CEOs over SVB's collapse and alleged preferential treatment of the largest depositors
- Lawmakers inquire about the length and nature of financial relationships, amounts deposited, and their role in SVB's $42 billion run
- Transparency and accountability are sought from Circle, BlockFi, and other tech firms to understand SVB's failure and prevent future incidents
Warren, AOC probe Circle, BlockFi in SVB collapse, seeking transparency on deposits, alleged preferential treatment, and role in bank's failure.
Executives from Circle, a stablecoin issuer, and BlockFi, a bankrupt cryptocurrency lender, were questioned by Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez (AOC) as part of an investigation into the alleged "mutual backscratching arrangements" with Silicon Valley Bank (SVB), which recently failed. Warren and AOC sent letters to Circle, BlockFi, and 12 other non-crypto tech firms, asking about their relationships with SVB.
The lawmakers expressed concern about SVB's reported preferential treatment of its largest depositors, which they referred to as "coddling" and "white glove" treatment. They questioned Circle and BlockFi CEOs, Jeremy Allaire and Zac Prince, about the length and nature of their financial relationships with SVB, the amounts deposited with the bank, and any agreements made between their firms.
Warren and AOC highlighted that SVB's reliance on the tech industry resulted in a high percentage of deposits that were not insured by the Federal Deposit Insurance Corporation, which may have contributed to SVB's collapse. They questioned the executives about the role that companies like Circle and BlockFi may have played in the $42 billion single-day run on SVB.
The lawmakers emphasized the importance of obtaining information on these factors to understand the cause of SVB's failure and prevent similar incidents in the future. They specifically mentioned Circle's disclosure of $3.3 billion tied up at SVB and BlockFi's $227 million in uninsured deposits with the bank as examples that may need further explanation.
Overall, the lawmakers are seeking transparency and accountability from Circle, BlockFi, and other tech firms in relation to their relationship with SVB and its collapse, to better understand the events leading up to it and take measures to prevent similar failures in the future.
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