Goldman Sachs is being investigated by federal regulators over its role in buying Silicon Valley Bank’s securities portfolio at the same time it was advising the failed lender on raising capital just before its eventual collapse this year, according to a report.
The Fed, the Securities and Exchange Commission, and the Department of Justice are seeking documents from Goldman as part of broader investigations into the downfall of Silicon Valley Bank, The Wall Street Journal is reporting.
Goldman is being scrutinized for alleged improper communication between its trading division and its investment banking department about the sale of the portfolio, sources told The Journal.
Goldman said in SEC filings last month that it was “cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries into SVB, including the firm’s business with SVB in or around March 2023.”
When reached by The Post, a spokesperson for Goldman said: “SVB engaged Goldman Sachs to assist with a proposed capital raise and sold the firm a portfolio of securities.”
“Prior to that sale, Goldman Sachs informed SVB in writing that we would not act as their advisor 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 advisor,” the Goldman spokesperson said.
“As we have publicly disclosed in our 10-Q, Goldman Sachs is cooperating with and providing information to various governmental bodies in connection with their investigations and inquiries into SVB, including the Firm’s business with SVB in or around March 2023,” the spokesperson added.
An SEC spokesperson said in an emailed statement to Reuters that the agency “does not comment on the existence or nonexistence of a possible investigation.”
Spokespeople for the Fed and DOJ declined to comment.
Just before its collapse in March, Silicon Valley Bank was worried about its credit rating being downgraded by Moody’s.
So it turned to Goldman, which recommended raising more capital in hopes of reassuring jittery investors.
At the same time, Goldman bought up $21 billion worth of debt at a discount — this as Silicon Valley Bank’s stock nosedived following Goldman’s involvement in raising capital.
Silicon Valley Bank said it took a loss of $1.8 billion on the sale of its debt.
The Wall Street giant was also an underwriter for a failed share sale by the bank that eventually paved the way for its meltdown.
A short time later, Silicon Valley Bank was seized by the Federal Deposit Insurance Corporation, triggering a crisis in the lending sector that also claimed Signature Bank of New York and First Republic.