Senator Cynthia Lummis Slam Bank Execs for Blaming Collapses on Crypto, Pocketing Millions

Updated: 17 May 2023

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In a recent Senate Banking Committee hearing, former chairman of Signature Bank, Scott Shay, faced criticism from Senator Cynthia Lummis over allegations of attempting to shift blame for the bank’s collapse onto cryptocurrency.

Lummis accused Shay of benefiting from substantial bonuses and stock options while pointing fingers at the digital asset industry. During his prepared statement, Shay acknowledged that the bank had accepted deposits from digital asset businesses starting in 2018 but reduced its exposure to such warranties due to market volatility in 2022.

He claimed that regulators seized the bank after another financial institution with ties to the digital asset sector encountered difficulties, leading to the withdrawal of $16 billion from Signature Bank.

Senator Lummis condemned Shay for allegedly deflecting blame onto depositors and regulators while evading personal responsibility. However, Shay denied assigning fault to digital assets during the hearing, refuting Lummis’ accusations. This clash between Shay and Lummis adds further intrigue to the ongoing investigation into the collapse of Signature Bank.

Senator Elizabeth Warren Takes on CEOs Over Retaining Millions After Bank Crashes

In a fiery hearing today, Senator Elizabeth Warren launched a scathing attack on Gregory Pecker, CEO of Silicon Valley Bank, and Shay, CEO of Signature Bank, accusing them of pocketing millions of dollars after their banks crashed due to reckless practices.

Senator Warren criticized the current laws that allow CEOs like Pecker and Shay to receive exorbitant bonuses and stock options only to retain the funds even when their banks fail. She called this practice “plainly wrong” and warned of its consequences, stating that it incentivizes CEOs to take on excessive risks, leading to further bank failures. At the same time, the general public bears the financial burden.

To address this issue, Senator Warren revealed that she is collaborating with a bipartisan group in the Banking Committee to draft legislation aimed at reclaiming these “crazy paychecks” and holding CEOs accountable for their actions.

In April, Adrienne Harris, the superintendent of the New York Department of Financial Services (NYDFS), made a statement rejecting the idea that crypto could be blamed for the collapse of Signature Bank. During a Chainalysis Links conference in New York City, she characterized the events leading to the bank’s failure as a “new-fashioned bank run.”

On March 12, the NYDFS assumed control of Signature Bank, citing its aim to safeguard the U.S. economy from “systemic risk.” This move came after the collapse of Silvergate Bank and SVB, both of which had been crypto-friendly. However, Harris dismissed the notion that cryptocurrency was the cause of Signature Bank’s collapse as “ludicrous.”

Harris’s remarks implied that the failure of Signature Bank was primarily due to a traditional bank run, wherein depositors rapidly withdrew their funds due to concerns about the bank’s stability. This perspective suggests that the bank’s underlying issues were unrelated to its involvement with cryptocurrencies.