Stakeholders File Lawsuit Against Collapsed Silicon Valley Bank for Fraud
- Greg Becker, the CEO of Silicon Valley Bank, and Daniel Beck, the chief financial officer, were named defendants in the class-action lawsuit.
- At the time of closure, Silicon Valley Bank allegedly had capital losses of around $16 billion.
In light of the ongoing banking crisis, several shareholders allegedly filed a lawsuit against the parent company of Silicon Valley Bank and a few of its officials.
According to Bloomberg, shareholders of Silicon Valley Bank filed a fraud lawsuit against the institution following its closing last week. Furthermore, the financial institution’s sudden and unexpected fall marks the biggest bank failure since the 2008 financial crisis. According to reports, Circle had more than $3 billion of the stablecoin’s reserves at the financial institution when California regulators shut down the bank on March 10.
Over the weekend, the Federal Reserve announced that it would offer assistance to uninsured customers at the bank that is currently closed. Contrarily, Silicon Valley Bank reportedly had about $16 billion in capital losses at the time of closure, according to CNBC.
The failure of Silicon Valley Banks is one of the most concerning financial industry patterns of recent times. The financial institution fell apart in a matter of a week, apparently out of nowhere. As a result, the public started to fear a bank run, which had a terrible impact on bank equities the following Monday.
According to a Bloomberg story, shareholders are suing Silicon Valley Bank for fraud. The claims made in the case specifically relate to alleged poor event management that caused its collapse. The case is the first of many that will likely be filed against SVB for securities fraud, according to Bloomberg.
According to the shareholders, SVB, Becker, and Beck hid information about the company’s interest rates, making it “particularly vulnerable” to a bank run. According to the owners, the bank has made the following public statements:
“understated the risks posed to the company by not disclosing that likely interest rate hikes, as outlined by the Fed, had the potential to cause irrevocable damage to the company”
Regulators, investors, and business executives worldwide keep announcing new developments relating to the ongoing crises with Signature Bank, Silicon Valley Bank, and Silvergate Bank. Numerous cryptocurrency companies, such as BlockFi, which is currently going through bankruptcy, and Gemini, have either asserted that they had enough cash on hand to cover their exposure to the impacted banks or that they had no exposure at all.