A shareholder of Silicon Valley Bank has filed a lawsuit in federal court alleging that the company was negligent in its management and oversight of the now-failed financial institution, and that executives committed fraud in making misleading statements about the bank's condition.
The complaint, which is seeking class-action status for those who acquired shares between June 16, 2021, and March 10, 2023, names SVB Financial Group, CEO Greg Becker and Chief Financial Officer Daniel Beck, as defendants.
The lawsuit is seeking resolution through a jury trial and to recover damages for alleged violations of securities laws, legal fees and other financial relief.
The lawsuit alleges that the two named plaintiffs were directly or indirectly involved in sharing false and misleading statements in their role as executives. The complaint also says the defendants failed in their responsibilities for oversight and implementation of the company's internal controls.
Among the issues at play is the bank's failure to foresee the impact of interest rate hikes that were telegraphed by the Federal Reserve.
The lawsuit says that in a number of regulatory filings, the bank failed to list or understated the risk that rising interest hikes could cause irrevocable damage to the company.
When news emerged that SVB was selling off $21 billion of assets at a $1.8 billion loss and seeking additional capital on the market, the price of the bank's stock plummeted. The lawsuit says that further media reporting and investigation found that interest rate increases were a major factor in regulators deciding to shut down the bank.
The complaint alleges that the defendants violated securities law by making untrue statements or omitting material facts in their communications with shareholders, meaning that the market price of the company's shares was "artificially inflated."
Kevin Truong can be reached at firstname.lastname@example.org