Sen. Warren, Rep. AOC Ask Circle, BlockFi Why They Banked at SVB

Explore the policy fallout from the 2022 market crash, the advance of CBDCs and more.

Sen. Elizabeth Warren (D-Mass.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) want to know why crypto companies, including bankrupt crypto lender BlockFi and stablecoin issuer Circle, banked at now-collapsed Silicon Valley Bank.

The lawmakers sent letters to BlockFi and Circle on Sunday with a list of questions and concerns. Twelve other non-crypto firms received similar letters.

The two Democratic lawmakers are looking for more information on what they call the “mutual backscratching dynamic” between SVB and venture capitalists, in which the bank treated VCs and other high-rolling depositors to extensive lines of credit and luxurious “white glove” services like “industry ski trips, conferences and fancy dinners.”

The proverbial champagne service, the lawmakers argue, “could help explain why some customers placed massive, uninsured deposits at SVB” – which ultimately forced federal regulators to spend $20 billion to staunch the flow of withdrawals when the bank collapsed after a $42 billion single-day run last month.

Now, they want answers from Circle and BlockFi’s CEOs, Jeremy Allaire and Zac Prince, respectively. The two firms held approximately $3.5 billion in uninsured deposits at SVB, of which Circle alone was responsible for $3.3 billion.

Allaire and Prince have been asked to provide answers about the history of their relationships with SVB, including how much money they deposited and maintained at the bank, investment relationships between the firms, their related entities and SVB.

They have also been asked to provide information about the alleged “coddling” of any of their executives or board members by SVB, including details about financial relationships between the executives and SVB, any trips executives took that were sponsored by SVB, and whether any executive ever raised a red flag internally about SVB’s exposure to uninsured assets.

The firms’ responses are due on April 24.

DISCLOSURE