SVB Financial Group, CEO, CFO Sued for Fraud
SVB Financial Group’s top executive officers were sued on Monday by shareholders who accused them of concealing how rising interest rates would leave its Silicon Valley Bank unit, which failed last week, “particularly susceptible” to a bank run.
The proposed class action against SVB, Chief Executive Greg Becker and Chief Financial Officer Daniel Beck was filed in the federal court in San Jose, California.
It appeared to be the first of many likely lawsuits over the demise of Silicon Valley Bank, which U.S. regulators seized on March 10 following a surge of deposit withdrawals.
SVB had surprised the market two days earlier by disclosing a $1.8 billion after-tax loss from investment sales and that it planned to raise capital, as it scrambled to meet redemption requests.
Silicon Valley Bank had an estimated $209 billion of assets and $175.4 billion of deposits before its collapse, in the largest U.S. bank failure since the 2008 financial crisis.
Its collapse has sparked fears of contagion among other lenders that also cater to wealthy clients, including technology start-ups and venture capital-backed companies, as well as large regional banks.
In Monday’s lawsuit, shareholders led by Chandra Vanipenta said Santa Clara, California-based SVB failed to disclose how rising interest rates would undermine its business model, and leave it worse off than banks with different client bases.
The lawsuit seeks unspecified damages for SVB investors between June 16, 2021, and March 10, 2023.
SVB said on Monday it will explore strategic alternatives for what remains of the company, now shorn of its main banking business. The case is Vanipenta v SVB Financial Group et al, U.S. District Court, Northern District of California, No. 23-01097.
