Lawmakers Interrogate Circle And BlockFi in Connection to SVB

Some lawmakers are interrogating corporate clients of the now-shattered Silicon Valley Bank (SVB) to find out their reasons for banking with the institution.

So far, executives at fourteen companies including defunct BlockFi and Circle, the company responsible for issuing the United States dollar-pegged stablecoin USDC issuer, have received letters from Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez (AOC).

According to these lawmakers, all concerned companies were given “white glove” treatment and eventually ended up participating in “mutual back-scratching arrangements”. At the same time, Senator Warren and AOC have asked some questions and expressed some concerns in the letter to better understand the relationship which existed between SVB and all of its associates, especially the “coddling” activities and “white glove” treatment.

Explicitly, there are suspicions that most of these firms could have contributed to the collapse of SVB a few weeks ago.

Notably, these companies currently being questioned by the Democratic lawmakers are some of the largest depositors of the now-failed U.S. bank. At certain times, they were offered extensive line credit and other luxurious services including “industry ski trips, conferences and fancy dinners.”

The lawmakers wish to confirm if these trips were fully sponsored by SVB. Also, they intend to find out if the activities of SVB’s exposure to uninsured assets were ever escalated to the appropriate authorities by any executives from the interrogated firms before the firm collapsed and filed for Chapter 11 bankruptcy protection.

Circle And BlockFi Reports exposure to SVB

In the days leading to the collapse of SVB, Circle declared that it had about $3.3 billion exposure to the U.S. financial institution.

These assets represented about 8% of the total reserve backing the USDC and it was being held as cash deposits in Silicon Valley Bank. This sad news imparted the dollar-pegging of the USDC token. The USDC lost its value and this led to excessive outflow from the platform to the tune of billions.

BlockFi on the other hand, made a deposit of $227 million in uninsured funds in SVB, therefore bringing the total uninsured deposits in SVB from both firms to $3.5  billion.