After SVB failed and in light of the closure of the cryptocurrency-friendly Silvergate Bank earlier in the week, nervous customers withdrew more than $10 billion in deposits.

Two days after Signature was closed, it became known that the bank was being investigated by the United States Department of Justice concerning its failure to properly scrutinize clients' activities for signs of money laundering.

It also made relatively few loans: adopting a strategy once used by Republic Bank, it put its assets in instruments with lower yields.

[15][14] CEO DePaolo refused to decorate his office with art, finding it a sign of complacency, and usually ate a deli lunch at his desk.

[16] After the 2007–2008 financial crisis, Signature's style of relationship banking led to years of double-digit increases in loans and deposits.

[19] An increase in loan activity offset its traditional reliance on mortgage-backed securities; its large capital cushion helped it to protect the many depositors whose accounts were larger than the Federal Deposit Insurance Corporation (FDIC)-insured $250,000.

[15] Signature Financial's taxi medallion lending business was hurt by the rise of car sharing platforms such as Uber.

[23] The move came the year after DePaolo, once reluctant to expand beyond New York,[13] opened the door to adding additional markets in comments made at an investors' conference.

[22] In 2020, the bank continued its expansion throughout southern California, opening new offices in Newport Beach, Woodland Hills, and Ontario.

[24] 2022 brought the opening of an office in Reno, Nevada, and a West Coast operations center in City of Industry, California.

[31] Irv Gotti became a loyal Signature customer after it allowed him to use its services while on trial for federal money laundering charges in 2005; even though he had not been found guilty, other banks refused to let him maintain accounts.

[32] A later analysis by the Wall Street Journal found that DePaolo, Howell, and Shay had sold significant amounts of their Signature stock during the stock's cryptocurrency-fueled price surge in 2021, which eluded attention because the bank filed its insider trading reports with the FDIC, not the SEC, unusual for institutions of Signature's size.

[17] Some investors privately raised concern about liquidity: per the Financial Times, "as Signature banks eight of the 12 largest crypto brokers, for instance, an implosion of the industry in a credit crunch could see their deposits rapidly evaporate".

[38][39] The Financial Times noted that Marc Cohodes, a short seller of Signature, had written the Department of Justice in January 2023 warning that the bank had served as "a facilitator, even if unwitting, for countless illegal crypto transactions" due to its lax procedures.

[40] The core of its cryptocurrency business was Signet, a payment network opened in 2019 for approved clients that allowed the real-time gross settlement of fund transfers through the blockchain without third parties or transaction fees, similar to Ripple.

"We find it ridiculous and unacceptable that by virtue of … growing one day past $50 billion, we will be burdened with rules intended for the mega 'too big to fail' banks," Scott Shay, chairman of Signature, said.

[47] Barney Frank, both a former U.S. congressman (1981–2013) and a member of Signature Bank's board of directors (2015–2023),[49] had voted in favor of raising the Dodd–Frank threshold.

[36] The bank proved unable to close a sale or otherwise bolster its finances before Monday morning, when it would have faced an avalanche of withdrawal requests placed over the weekend by nervous customers, in order to protect its assets after customers began withdrawing their deposits in favor of bigger institutions; it was losing deposits so fast that it was forced to ask the Federal Home Loan Bank of New York for money twice within 90 minutes.

[60] The FDIC, Federal Reserve, and Treasury Department issued a press release stating their expectation that all depositors would be made whole,[61] while holders of Signature Bank equity and bonds lost their investment.

"[57] This sentiment was echoed by House Majority Whip Tom Emmer, who sent a letter to FDIC Chairman Martin J. Gruenberg inquiring about the possible purging of legal cryptocurrency activity in the U.S. under the guise of stabilizing the banking system.

[67] Analyst Christopher Whalen attributed the bank's failure to its cryptocurrency involvement, which he called a "huge error in judgment by veteran bankers".

[68] Former director and senator Al D'Amato noted that the bank's crypto venture caused Signature to "[take] their eyes off of that small entrepreneur" that had once been a focus of the company.

The DFS report stated that "[Signature's] growth outpaced the development of its risk control framework", with regulators downgrading the bank's liquidity score in 2019.

[72] This included $11 billion in loans on rent-regulated apartment buildings, which had lost value since a 2019 law change that limited rent increases.

[2] At the end of July 2023, the FDIC launched a process to sell an $18.5 billion portfolio of private equity-linked loans held by Signature.