Key Points:
- CEO Greg Becker and Chief Financial Officer Daniel Beck of Silicon Valley Bank (SVB) have been filed by shareholders in California federal court for fraud.
- Shareholders said California-based SVB should have disclosed how rising interest rates would undermine its business model and make it worse off than banks with disparate customer bases.
- The lawsuit seeks unspecified damages to SVB investors between June 16, 2021, and March 10, 2023.
According to Reuters, Silicon Valley Bank (SVB) shareholders filed a lawsuit against two top executives at its California headquarters on Monday for concealing that rising interest rates would make the bank vulnerable to its current crisis.
Two defendants, CEO Greg Becker, and CFO Daniel Beck have been filed in federal court in San Jose, California.
As mentioned earlier, Silicon Valley Bank had an estimated $209 billion in assets and $175.4 billion in deposits before bankruptcy, making it the largest U.S. bank bankruptcy since the Great Depression financial crisis of 2008.
U.S. regulators decided to shut down and foreclose on March 10 following a spike in deposit withdrawals.
Silicon Valley Bank surprised the market two days earlier when it announced a $1.8 billion after-tax loss from the sale of its investments, and it plans to raise capital as it struggles to meet buying requirements again.
Its demise further affirms earlier government agencies’ concerns about the risks to industries exposed to cryptocurrencies. A series of banks, such as Silvergate Bank and Signature Bank, has also been ordered to close amid concerns about the contagion among other lenders serving wealthy customers, including startups technology and venture-backed companies, as well as regional central banks.
In Monday’s lawsuit, shareholders led by Chandra Vanipenta said Santa Clara, California-based SVB should have disclosed how rising interest rates would undermine its business model and make it worse than banks with different customer bases.
The lawsuit seeks unspecified damages to SVB investors between June 16, 2021, and March 10, 2023.
Yesterday, HSBC officially acquired Silicon Valley Bank U.K. Ltd in a purchase backed by the Bank of England and the Treasury. Transactions are made possible thanks to the powers granted by the Banking Act 2009, which allows for the secure management of banking incidents without needing taxpayer funds.
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