(Reuters) - U.S. prosecutors were investigating Signature Bank's association with crypto clients before regulators suddenly seized the lender last weekend, Bloomberg News reported on Tuesday, citing people familiar with the matter.

U.S. Justice Department investigators in Washington and Manhattan were examining whether the now-collapsed bank took necessary steps to detect potential money laundering by its clients, according the report, adding that the Securities and Exchange Commission (SEC) was also scrutinizing the bank.

The report comes after New York's financial regulator earlier in the day said its decision to close Signature Bank had "nothing to do with crypto", but was spurred by what it called "a significant crisis of confidence in the bank's leadership" after the collapse of Silicon Valley Bank.

The U.S. Federal Deposit Insurance Corporation, which has taken control of the lender, declined to comment on the report. The SEC, Justice Department and Signature Bank didn't immediately respond to Reuters' request for comments.

State regulators closed New York-based Signature Bank on Sunday, the third largest failure in the U.S. banking history, and two days after authorities shuttered Silicon Valley Bank (SVB) in a collapse that stranded billions in deposits.

As of September last year, almost a quarter of Signature Bank's deposits came from the cryptocurrency sector, but the bank announced in December last year that it would shrink its crypto-related deposits by $8 billion.

(Reporting by Kanjyik Ghosh in Bengaluru; Editing by Rashmi Aich)