Elizabeth Warren, AOC Ask SVB Depositors to Detail Ties to Bank

(Bloomberg) -- Senator Elizabeth Warren of Massachusetts and Representative Alexandria Ocasio-Cortez of New York sent letters Sunday to 14 of the largest depositors with Silicon Valley Bank that raised concerns over the failed bank’s relationship with some of the venture capitalists and tech founders who made up much of its customer base.

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In letters reviewed by Bloomberg that were sent to companies including Circle Internet Financial, BILL Holdings Inc., BlockFi Inc. and Eiger BioPharmaceuticals Inc., Warren and Ocasio-Cortez asked questions about the nature of their connections with SVB. Those included the length of their relationship and the amount of money they had deposited with the bank, which collapsed in March after investors and depositors tried to pull out $42 billion in a single day.

The two Democrats, who have been vocal critics of SVB and its executives, also want to know whether board members, executives or investors had received special benefits, such as lines of credits, from SVB.

In particular, the lawmakers are interested in reports that said SVB coddled some of its largest venture capitalists and showered them with special perks, and in return the VC firms gave the bank access to huge unsecured sources of short-term funding, the letters said. The lawmakers asked for the answers to these questions to be provided by April 24.

“Silicon Valley Bank’s unusually cozy relationship with its clients increased the threat of contagion when the bank went under,” Warren said in a statement to Bloomberg. “The American people deserve to know how these mutual backscratching arrangements developed, who benefitted from them, and what role they played in Silicon Valley Bank's failure.”

The 14 firms that received letters are Circle, BILL, BlockFi, Eiger, Ginkgo Bioworks Inc., iRhythm Technologies Inc., LendingClub Corp., Oncorus Inc., Payoneer Global Inc., Protagonist Therapeutics Inc., Roblox Corp., Rocket Lab USA Inc., Roku Inc. and Sangamo Therapeutics Inc.

A Roblox spokesperson said in an email the company received the letter and “consistent with our process, will be replying in a timely manner.” In a statement, Eiger interim Chief Executive Officer David Apelian, pointed to a financial statement showing the company had $8.3 million in deposits with SVB, or 6.9% of the company’s cash and cash-equivalents. The other companies didn’t immediately respond to requests for comment.

SVB was the biggest US bank failure in more than a decade and its collapse triggered a backstop by the federal government. The bank had once been the partner of choice for VCs, startups and private equity firms because of its wide range of services, positive reputation and willingness to provide flexible credit lines to early-stage startups and venture and PE firms.

First Citizens BancShares Inc. agreed to buy $72 billion worth of SVB’s assets in March in a deal that would leave about $90 billion in securities and other assets with the Federal Deposit Insurance Corp.

(Adds company comment in the eighth paragraph.)

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