Class action suit filed against Silicon Valley Bank parent
A class action lawsuit is being filed against the parent company of Silicon Valley Bank, its CEO and its chief financial officer, saying that company didn't disclose the risks that future interest rate increases would have on its business.
The lawsuit against SVB Financial Group, CEO Greg Becker and CFO Daniel Beck was filed in the U.S. district court for the Northern district of California. It is looking for unspecified damages to be awarded to those who invested in SVB between June 16, 2021 and March 10, 2023.
The lawsuit from shareholders led by Chandra Vanipenta says some quarterly and annual financial reports from SVB didn't fully account for warnings from the Federal Reserve about interest rate hikes.
In particular, the lawsuit said that annual reports for 2020 through 2022, “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,” the lawsuit stated.
It also claims that the company "failed to disclose that, if its investments were negatively affected by rising interest rates, it was particularly susceptible to a bank run.”
The collapse of Silicon Valley Bank has shaken the technology industry and worried small businesses and individuals with deposits at the financial institution. The Biden administration’s move guaranteeing all Silicon Valley Bank’s deposits above the insured limit of $250,000 per account has brought relief to some.
Silicon Valley quickly established itself as the “go-to” spot for venture capitalists looking for financial partners more open to unconventional business proposals than its bigger, more established peers who still didn’t have a good grasp of technology.
Venture capitalists set up their accounts at Silicon Valley Bank just as the tech industry started its boom and then advised the entrepreneurs that they funded to do the same.
That cozy relationship came to an end when the bank disclosed a $1.8 billion loss on low-yielding bonds that were purchased before interest rates began to spike last year, raising alarms among its financially savvy customer base who used the fruits of technology to spread warnings that turned into a calamitous run on deposits.
Michelle Chapman, The Associated Press