Goldman Sachs is now facing scrutiny from the US Federal Reserve and the US Securities and Exchange Commission (SEC) for its involvement in buying a portfolio of Silicon Valley Bank securities before the bank collapsed, The Wall Street Journal reported, citing people familiar with the matter The two agencies are investigating Goldman Sachs' conduct during a failed financing round before SVB's collapse, the report said. The Justice Department also reportedly issued a subpoena to Goldman Sachs as part of its investigation into SVB.
The insiders also allegedly reported that the Federal Reserve and the SEC were particularly interested in obtaining documents related to Goldman's dual role as a buyer of SVB's securities portfolio and as an advisor to the bank on financing. The agencies are reported inv estigating whether there was any inappropriate communication between Goldman's investment banking arm and its trading desk about the portfolio sale.
In response, Goldman Sachs said it "is cooperating with and providing information to various government agencies regarding investigations and inquiries into SVB, including the firm's business with SVB in or about March 2023." In the final days leading up to SVB's collapsing se, Goldman Sachs was reportedly hired to help the bank raise capital. Meanwhile, its trading arm bought "SVB's $21 billion portfolio of available-for-sale debt securities" at a discount. As The Wall Street Journal reported, bankers and financial lawyers say it is un usual for banks to act as both advisors and buyers of corporate assets, except in times of financial distress.
Goldman Sachs advised SVB executives to “sell some or all of their portfolio of securities” before raising capital to justify funding needs, the people said. Former SVB CEO Greg Becker reiterated that recommendation in testimony before the Senate Banking Committee. In re response to the allegations , a Goldman Sachs spokesperson said:
"[Goldman Sachs] informed SVB in writing that we would not be acting as advisors to them on the sale and that SVB should not rely on any advice from the bank in this regard and should engage third-party financial advisors." On March 10 , California regulators took the unprecedented step of shutting down Silicon Valley Bank, a prominent financial institution serving venture capital firms and technology companies. Before its collapse, SVB was the 16th largest bank in the United States, with more than $212 billion in assets.
Following that incident, on March 17, SVB Financial Group filed for Chapter 11 bankruptcy protection. The voluntary petition is intended to facilitate a court-supervised restructuring process to preserve the company's value.
