Investors File Suit Against Failed SVB Bank, Senior Executives - Court Documents

WASHINGTON (Pakistan Point News / Sputnik - 14th March, 2023) Shareholders have filed a class-action lawsuit against the Silicon Valley Bank (SVB) as the US government accuses the California-based lender of mismanagement after stepping in to rescue the depositors' money, court documents showed on Monday.

The action against SVB and its Chief Executive Officer Greg Becker and Chief Financial Officer Daniel Beck was filed in US federal court in San Jose, California, by a plaintiff identified as Chandra Vanipenta. The later represents "all other persons similarly situated" by the collapse of the bank, according to the lawsuit seen by Sputnik.

SVB was one of the top 20 commercial banks in the United States and the largest US lender to fail since Washington Mutual collapsed in 2008 at the height of the financial crisis. Investors at the California-based bank withdrew $42 billion in deposits last week, triggering a 60% plunge in its share prices.

SVB provided financing for almost half of US venture-backed technology and health care companies. At the end of 2022, the bank said it had $151.5 billion in uninsured deposits, $137.6 billion of which was held by US depositors. Its total assets as of the end of last year equaled $209 billion.

The Federal Deposit Insurance Corporation, or FDIC, took charge of SVB over the weekend.

The FDIC also took control of Signature, which had $110.

36 billion in assets and $88.59 billion in deposits at the end of last year, according to New York State's Department of Financial Services.

Earlier on Monday, President Joe Biden promised the government would undertake action against reckless risk taking by financial organizations. Biden said the FDIC protection for depositors at SVB and Signature will not be extended to investors and the management at the collapsed banks.

"The management of these banks will be fired," Biden said. "If the bank is taken over by FDIC, the people running the bank should not work there anymore. Investors in the banks will not be protected. They knowingly took a risk and when the risk didn't pay off, investors lost their money. That's how capitalism works and so forth. But there are very important questions of how these banks got into the circumstances in the first place. We must get the full accounting of what happened, and why those responsible can be held accountable. In my administration, no one is above the law."

The language in the class-action lawsuit accuses the SVB management of issuing misleading guidance to investors even as it knew the extent of the troubles at the bank.

SVB's Becker held a conference call with the bank's clients, including venture capital investors, last week and urged them to stay calm to try and avoid a run on the bank's deposits.