A Silicon Valley Bank (SVB) shareholder filed a class-action lawsuit against the company for failing to disclose risks associated with its business model, according to Bloomberg Law.
The plaintiff, Chandra Vanipenta, says the bank’s parent company, SVB Financial Group, failed to disclose the risk posed by rising interest rates in its past two years of quarterly reports filed with the U.S. Securities and Exchange Commission (SEC), according to the court filing. SVB shares dropped to 60% on Thursday, leading to its collapse and takeover by the Federal Deposit Insurance Corporation (FDIC) on Friday.
Company reports repeatedly “understated” risks posed by interest rate hikes, which left the company “particularly susceptible to a bank run” and “worse off than banks that did not cater to tech startups,” the court filing said.
On Friday, the FDIC – the government regulator in charge – took control of Silicon Valley Bank’s assets.
Over the weekend, it did the same with Signature Bank.
Here’s what comes next:
— President Biden (@POTUS) March 13, 2023
The class action securities fraud lawsuit includes all who purchased publicly traded shares in SVB between June 16, 2021, and March 10, 2023. Vanipenta said he bought company securities at “artificially inflated” prices during this period.
SVB Financial Group, CEO Greg Becker and CFO Daniel Beck are listed as defendants in the lawsuit. The case was filed in the U.S. District Court for the Northern District of California.
SVB’s collapse is the second-largest bank failure in American history. President Biden promised Monday morning that SVB clients would “have access to their money,” adding that there will be no cost to taxpayers. The Treasury, Federal Reserve, and FDIC also announced Sunday night that “all depositors” would be made whole.
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