According to reports, several employees of First Republic Bank (FRCB) are being investigated by the Department of Justice for their stock trading actions during the bank’s recent collapse. The bank was dissolved on May 1 and its assets were transferred to JPMorgan Chase & Co. (JPM) after the FDIC was appointed as the receiver. JPMorgan acquired $173 billion in loans, $30 billion in securities, and $92 billion in deposits from the defunct bank, which led to criticism regarding the choice of JPMorgan and the cost to the country’s primary deposit insurance fund. The DOJ inquiry is still in its early stages and will focus on whether any bank employee used inside information to trade in relation to the bank’s collapse, as well as reviewing the bank’s financial reports. The Justice Department and JPMorgan have declined to comment regarding the investigation so far. Earlier this month, the SEC also opened an investigation into First Republic’s management for potential insider trading before the government seizure.
The DOJ’s fraud section is also examining the collapses of Silicon Valley Bank and Signature Bank, as well as Silvergate Capital’s relationship with Sam Bankman-Fried’s bankrupt FTX exchange and Alameda Research, although no misconduct has been uncovered so far. The SPDR S&P Regional Banking ETF (KRE) fell 1.7% on Wednesday after briefly hitting a technical hurdle a day earlier.
