Signature Bank Insiders Sold Stock During Crypto Rise

While Signature Bank was pressing forward with cryptocurrency, its insiders were selling hundreds of millions in shares.

The bank’s chairman and two previous chief executives sold more than $100 million in shares in the past three years, the Wall Street Journal reported. Sales by chairman Scott Shay, CEO Joseph DePaolo and chief operating officer Eric Howell amount to around half of the total deals.

The stock sales previously flew under the radar because documents were filed with the Federal Deposit Insurance Corporation, not the Securities and Exchange Commission. It was one of two S&P 500 companies that didn’t file its insider trading transactions with the SEC. The other: First Republic Bank, which nearly failed last month.

The bank also appears to have miscategorized some of the FDIC filings. They were labeled as dispositions — shares sold back to the company — rather than open market sales. As a result, websites that track insider sales were not able to scrape those.

In 2021, the bank’s shares grew 140 percent as Signature greatly increased its exposure to the crypto industry. Company insiders that year made $70 million from stock sales doubling the amount of sales from the previous year.

All three of the primary actors were on the board committee that oversaw the bank’s risk in the past year. New York regulators last month seized the bank and put it in receivership; its deposits have been assumed by a subsidiary of New York Community Bank, while its commercial loans remain up for grabs.

The FDIC is investigating the banks’ directors and officers for their actions leading up to the bank’s failure, which could result in monetary penalties, restitution and industry bans.

That’s in addition to the small fortunes lost by former executives of the bank. In the 14 months leading up to the March 12 collapse of the bank, the stock of three bank co-founders lost all of its value, roughly $285 million in all. DePaolo and Shay may be eligible for severance, despite the third-largest bank collapse in United States history happening under their watch.

— Holden Walter-Warner