NYDFS shuts down Signature Bank over data inconsistencies, not anti-crypto bias

Regulator cites "significant crisis of confidence" in leadership, rather than cryptocurrency-related concerns, as reason for closure.

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The New York State Department of Financial Services (NYDFS) shut down Signature Bank for “failing to provide consistent and reliable data” and not because of an anti-cryptocurrency bias, according to the State’s statement and a March 14 report by the International Business Times.

The above statement comes in response to a statement by Signature Bank board member Barney Frank, who had accused the US regulator of shutting down Signature Bank simply to send a very strong anti-cryptocurrency message.

“It failed to provide reliable and consistent data”

According to the report, a NYDFS spokesperson pointed out that the closure of Signature Bank had “nothing to do with cryptocurrencies.” Rather, he argues, there was “a significant crisis of confidence in the bank’s leadership.”

The regulator observed a deluge of withdrawals from the bank over the weekend and when it attempted to obtain information from the bank’s leadership, it “failed to provide reliable and consistent data”, it said.

The report seems to imply that Barney Frank stood by his original claim. He said, “I think it was a factor (cryptocurrencies). I’m confused why it (Signature Bank) went out of business” and further reported that Frank claimed that: “the bank’s executives were working to provide data to regulators, but they were unable to complete that task before it closed.”

When does NYDFS take over a bank

Section 606 of the New York Banking Law authorizes the NYDFS to take over a bank for a variety of reasons, such as if the bank “has refused, upon proper demand, to submit its records and affairs for inspection by a department examiner” or “is in an unsuitable or dangerous condition to conduct its business.”

Signature Bank closed on March 12. Its closure was part of a wave of bank closures that had begun the previous week and included Silvergate Capital and Silicon Valley Bank.

Numerous cryptocurrency-related businesses had deposited funds with Signature Bank, including Coinbase, Celsius and Paxos. Cryptocurrency exchange, Gemini, had previously worked with Signature Bank, but said on March 13 that it had no funds in the bank at the time it closed.

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