Silicon Valley Bank executives, parent company sued after collapse

The class action lawsuit seeking damages alleges that the technology-focused bank failed to disclose the risks of rising interest rates.

Silicon Valley Bank’s parent company and two top executives are facing a class action lawsuit in the United States, where shareholders have accused financial institution of not disclosing the risks that expected increases in interest rates would have on its business.

The lawsuit, filed Monday in federal court in the Northern District of California, seeks unspecified damages from SVB Financial Group and its chief financial officer, Daniel Beck, as well as the bank’s chief executive, Greg Becker.

He bank collapsed and its assets were seized by the US government late last week following a massive withdrawal of funds by customers.

The lawsuit, which accuses SVB of violating federal securities laws, noted that the Federal Reserve, the US central bank, had signaled as early as 2021 that it would raise interest rates to tame inflation.

Lawyers for the shareholders said in the filing that the annual bank reports “underestimated the risks posed to the company by failing to disclose that likely interest rate hikes, as described by the Fed, had the potential to cause irreparable harm.” to the enterprise”.

Class actions allow plaintiffs to sue on behalf of a larger group of people in a similar situation, in this case the shareholders of SVB. The lead plaintiff in the lawsuit is Chandra Vanipenta, who according to the legal document bought shares in the company at “artificially inflated prices.”

“If Plaintiff and the other members of the Class had known that the market price of the company’s securities had been artificially and falsely inflated,…they would not have purchased the company’s securities at the artificially inflated prices they purchased, or at Absolutely,” the lawsuit said.

SVB Financial Group did not immediately respond to Al Jazeera’s request for comment.

SVB was the 16th largest bank in the US when it collapsed on Friday. Specializing in lending to tech startups and the venture capitalists who finance them, it had invested much of its money in US government bonds, which fell in value as interest rates went up.

The failure of SVB was followed by the collapse of Signature Bank, another US financial firm, raising fears of a broader economic fallout similar to the one 2008 financial crisis.

US President Joe Biden’s administration moved quickly to respond to bank failures, with his administration guaranteeing the money of all depositors at both banks, even those who were uninsured.

“This step will ensure that the US banking system continues to perform its vital functions of protecting deposits and providing access to credit to households and businesses in a manner that promotes strong and sustainable economic growth,” the government financial agencies said. of the US in a joint statement on Sunday.

A day later, Biden also pushed to reaffirm confidence in the US. Bank Systemsaying, “Americans can rest assured that our banking system is secure.”

Bank shares showed signs of recovery on Tuesday after falling in recent days.

In a report from New York City, Al Jazeera’s Gabriel Elizondo said the Biden administration’s moves to assuage depositors’ concerns seemed to be working.

“What the market is essentially signaling here is that it looks like the worst is over and that this is not going to spread to the broader banking sector in the US, at least not yet,” Elizondo said.