Silicon Valley Bank (SVB) on Monday was hit with what appears to be the first federal securities class-action lawsuit against it, carrying allegations that the bank made false or misleading statements pertaining to the potential impact rising interest rates could have on operations.
According to the suit filed against SVB Financial Group, CEO Greg W. Becker, and CFO Daniel Beck in U.S. District Court for the Northern District of California, shareholder Chandra Vanipenta, on behalf of a class that bought securities of SVB between June 16, 2021 and March 10, 2023 seeks unspecified damages for SVB’s alleged wrongful conduct in violation of federal securities laws.
The suit outlines multiple financial reports over several years that Santa Clara, California-based SVB filed with the U.S. Securities and Exchange Commission – none of which disclosed the risk of interest rate hikes. On March 7 the Federal Reserve announced it would raise interest rates quicker and higher than previously thought. SVB then experienced a bank run that led to its doors being shuttered March 10, marking the largest collapse of a financial institution since the peak of the financial crisis in September 2008.
“The statements (in SEC filings) were materially false and/or misleading because they misrepresented and failed to disclose…adverse facts pertaining to the company’s business which were known to defendants or recklessly disregarded by them,” the lawsuit alleged.
Silicon Valley’s customers were largely startups and others from the tech industry. SVB Capital, the venture investing arm of SVB Financial Group, which includes the failed commercial bank, provided funding for insurtechs like Root, Pie Insurance, Vouch, and early debt financing to Embroker and Clearcover.
Related: Root Discloses SVB Exposure; Lemonade Unaffected
On Sunday a joint statement from U.S. Treasury Secretary Janet Yellen, Fed Chair Jerome Powell and FDIC Chairman Martin Gruenberg announced a plan to stem a broader financial fallout and said deposits in SVB will be made whole.
The case is Chandra Vanipenta v SVB Financial Group, Greg W. Becker, and Daniel Beck, U.S. District Court, Northern District of California, No. 23-01097
Photo: A sign to Silicon Valley Bank is seen through raindrops on a window in Santa Clara, Calif. (AP Photo/Jeff Chiu)
Topics Lawsuits
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