The New York Department of Financial Services (NYDFS) shut down Signature Bank for “failing to provide consistent and reliable data” and not because of a bias against crypto, according to a March 14 report from the International Business Times. Signature Bank Board Member Barney Frank had previously accused the regulatory agency of shutting it down merely to “send a very strong anti-crypto message.”
According to the report, an NYDFS spokesperson said that the shutdown had “nothing to do with crypto.” Instead, there was “a significant crisis of confidence in the bank’s leadership.” The regulator was witnessing a deluge of withdrawals from the bank over the weekend, and when it attempted to get information from the bank’s leadership, they failed to provide “reliable and consistent data,” the report said in a paraphrase of the regulator’s statement.
The report seemed to imply that Barney Frank was standing by his original claim. It quoted him as saying in response: “I think that was a factor. I’m puzzled as to why it was closed,” and it stated that Frank claimed “bank executives were working to provide data to regulators” but could not accomplish this task before it was closed down.
New York Banking Law Section 606 authorizes the NYDFS to take over a bank for a variety of reasons, including if the bank “Has refused, upon proper demand, to submit its records and affairs for inspection to an examiner of the department” or “Is in an unsound or unsafe condition to transact its business.”
The NY DFS seized #SignatureBank under Section 606 of the New York Banking Law. Here’s the list of reasons justifying seizure. They are pretty wide-ranging. https://t.co/xY7TQVsltd. pic.twitter.com/zG5xv5FUFA
— Frances ‘Cassandra’ Coppola (@Frances_Coppola) March 14, 2023
Signature Bank was closed down on March 12. Its shuttering was part of a wave of bank closures that had started the previous week and that included Silvergate Capital and Silicon Valley Bank. Numerous crypto-related businesses had funds deposited at Signature, including Coinbase, Celsius, and Paxos. Crypto exchange Gemini had previously partnered with Signature, but it stated on March 13 that it did not have any funds at the bank at the moment it was shut down.