Signature Bank’s leaders have been selling its shares for years

The American company Tether Holdings, which releases the cryptocurrency tether, does not have direct access to the American banking system. Still, for a while, it found an alternative route through the now highly compromised Signature Bank.

Tether instructed crypto clients to pay for digital tokens by sending dollars to its banking partner in the Bahamas, Capital Union Bank, through Signature’s payment platform Signet, Bloomberg reports citing insiders.

The arrangement underscores crypto firms’ difficulty accessing the reluctant US banking system, even before Signature and “crypto-friendly” bank Silvergate Capital Corp. failed in March.

The general volatility has kept major banks on the sidelines, prompting crypto companies to seek alternatives from smaller, more willing lenders.

Tether Holdings was never sanctioned, so doing business with the firm was not illegal, says Alma Angotti, who has held senior positions at the Securities and Exchange Commission and the Treasury and is now a partner at the consulting firm Guidehouse. Still, she said that banks are under regulatory expectations to know who is accessing their products and services.

Angotti said that if Signature knew about the arrangement and allowed it, that could speak to the appetite for the high-risk asset. They may have known and decided this was less risky than directly opening a Tether account.

Bank officials involved in the sale

Representatives for New York-based Signature and the Federal Deposit Insurance Corporation, which took control of Signature on March 12, declined to comment on the allegations.

On top of that, some executives at now-bankrupt Signature Bank sold more than $100 million worth of bank stock over three years after the bank decided to attract cryptocurrency trading and placement companies and became a stock market darling, the Wall Street Journal reported.

Half of that sum came from sales by the bank’s former president, its former chief executive officer, and his successor. All three were on the board and tasked with overseeing the bank’s risk profile over the past year.