The US Securities and Exchange Commission (SEC) is investigating whether First Republic Bank executives were engaged in any insider trading activities before the government seizure and sale of assets to JPMorgan Chase, Bloomberg reported citing people familiar with the matter.

More Troubles for First Republic?

San Francisco-headquartered First Republic was seized by the California Department of Financial Protection and Innovation early last week, and the majority of its assets, including deposits, were brought by JPMorgan Chase in a rushed bidding process.

The collapse of the regional bank came with the continued outflow of deposits from the bank. Depositors took out over $100 million last March, following over $176 million outflow in 2022.

The troubles in the bank started when two other American banks, Signature Bank and Silicon Valley Bank, collapsed earlier this year. Then, First Republic received a lifeline deposit of $30 million from a consortium of 11 large banks, including JPMorgan Chase. However, that turned out to be ineffective as the bank's revenue in the first quarter went down 13.4 percent year-over-year to $1.2 billion. Also, its net interest income declined 19.4 percent to $923 million, and its net income went down 32.9 percent to $269 million.

Lawmakers Raising Questions

Though not officially confirmed, the report of the SEC's probe came a day after US Senator Elizabeth Warren accused First Republic executives of "mismanagement" in her letter to the bank's former CEO, Michael Roffler. In addition, she raised questions about the bank's risk management and executives' pay and bonuses.

Congresswoman Lois Frankel sold First Republic Bank in March before the stock dropped 80%

After she sold First Republic, she bought JP Morgan Chase which just bought First Republic. She clearly had inside information.

If me or you did this then we would be in prison. pic.twitter.com/blvDMF2ag6

— Matt Allen (@investmattallen) May 1, 2023

JPMorgan took over the failed bank last week, purchasing about $173 billion of loans and nearly $30 billion of securities. Further, the Wall Street giant bought $92 billion of deposits from First Republic.

The acquisition came after investors lost faith in First Republic's recovery, and the bank's shares plummeted. Its market value tanked from $20 billion to $557 million on the last trading day before JPMorgan's takeover.

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