10-Q, Member Exclusive

A thorough investigation of Goldman Sachs’ involvement with SVB is well under way

  • Looking at the series of unfortunate events around the SVB fiasco, agencies are investigating Goldman's role as both the buyer and an advisor to SVB. 
  • The Fed and the SEC are also delving into whether Goldman’s investment banking and trading division's communication with SVB about the portfolio sale was adequate.

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A thorough investigation of Goldman Sachs’ involvement with SVB is well under way

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A thorough investigation of Goldman Sachs' involvement with SVB is well under way

A thorough investigation of Goldman Sachs' involvement with SVB is well under way

Various governmental bodies are looking into Goldman's involvement with SVB right before it went down.


California’s congressional delegation run by Democrat Adam Schiff wrote to Attorney General Merrick Garland, SEC Chairman Gary Gensler, and FDIC Chair Martin Gruenberg, calling for an investigation into Goldman Sachs and its involvement with SVB, a week after SVB collapsed and was taken over by the Federal Deposit Insurance Corp.

The letter came on the heels of SVB's disclosure that Goldman Sachs had provided services as an adviser to SVB when it tried to raise funds to curb its crisis. The lender asked various government bodies, the DOJ, SEC, and FDIC to make certain of whether Goldman operated at “arm’s length” in its advisory service. 

Goldman Sachs was involved in a couple of deals with SVB right before it crumbled. Goldman allegedly advised SVB in raising capital and bought $21 billion of SVB's securities portfolio, which could be one of the reasons that set the scene for SVB's failure later.

Greg Becker, the former CEO of SVB, told the Senate Banking Committee in May that Goldman execs communicated to SVB execs that before they raised capital, SVB must sell part or all of its securities portfolio to display a need for capital. This also insinuates that SVB may have sold its securities to Goldman without considering other potential buyers so that its problems didn't seep out and catch the attention of the wider public.

A Goldman spokeswoman said that before the portfolio sale, Goldman informed SVB's CFO in writing that "we would not act as their adviser on the sale and that SVB should not rely on any advice from the bank in this regard, but instead hire a third-party financial adviser.”

Later in March, SVB reported that they have incurred a $1.8 billion loss on the sale of its debt securities and that it was selling stock to raise money. After the bank disclosed the news, SVB’s stock fell like a stone and what followed next was the beginning of the biggest banking crisis the sector has experienced in the last 15 years since the Great Recession.

Taking the series of unfortunate events around the SVB fiasco into consideration, the agencies are investigating the weakest link in the chain and are on the lookout for documents related to Goldman's role as both the buyer and an advisor to SVB

The Fed and the SEC are also delving into whether Goldman’s investment banking and trading division's communication with SVB about the portfolio sale was adequate and by the book.

The bank has expressed its willingness in cooperating with authorities, according to a Goldman spokesperson, and "providing information to various governmental bodies in connection with their investigations.”

Market recap

No boost for the fintech IPO Index last week

Coinbase (COIN) - up 6% to $57.49 per share

  • Despite the ongoing SEC lawsuit against Coinbase, its shares rose this week.
  • The exchange repurchased $64.5 million worth of its Convertible Senior Notes, a type of debt that can be exchanged into a set amount of the issuer's shares, at a 29% discount. This can be a factor in driving its stock higher last week.

Upstart (UPST) - down 15% to $31.99 per share

  • Fed chairman Jerome Powell signaled continued pressure ahead as the hike rate pause for June may be short-lived. 
  • The approaching higher rates mean that lending platforms will experience tougher times in the form of higher costs of capital and a deceleration in demand from end consumers.

Editor's picks

Tweet of the week

Just look at the charts

This week's reads

JPMorgan mistakenly deleted 47 million records, SEC alleges


JPMorgan Chase will pay a $4 million fine to settle SEC allegations that the bank mistakenly deleted millions of electronic records, leaving communications unavailable to regulators in a dozen investigations.

The SEC alleged Thursday that JPMorgan Securities permanently deleted 47 million electronic records, including emails and instant messages, from January 2018 to April 2018. As a result, the regulator said that JPMorgan could not come up with the requested documents in eight SEC investigations and four other regulatory probes.

Federal Reserve’s Powell: Smaller banks to be exempt from new capital requirements


Federal Reserve Chair Jerome Powell announced in a Senate Banking Committee hearing on Thursday that smaller banks with assets below $100 billion will not be affected by expected new rules requiring banks to keep more capital in the wake of bank collapses in March.

The capital requirements will mainly impact the eight largest U.S. banks, with the upcoming rules expected to apply the Basel III international standards to banks within the $100 billion and $250 billion asset range.

Robinhood to buy fintech firm X1


Robinhood Markets is buying fintech X1 Inc for about $95 million in cash as it looks for new revenue streams to counter weakness in its mainstay trading unit. The broker said on Thursday that X1's co-founders Deepak Rao and Siddharth Batra will join it to oversee the new business.

Based in San Francisco, X1 offers smart credit cards to customers and counts Affirm CEO and Paypal co-founder Max Levchin as one of its investors. X1 does not charge annual fees, late fees, or foreign transaction fees on its cards.

JPMorgan to cash in insurance policy after botched $175 million Frank deal


JPMorgan Chase is aiming to recover millions of dollars from an insurance policy that protected the US bank against fraud after its botched $175 million acquisition of financial aid startup, Frank.

It is unclear how much JPMorgan will recoup but such policies typically cover between 10 and 20 percent of a purchase price, which in the Frank deal would amount to between $17.5 million and $35 million.

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