A class action lawsuit is being filed against Silicon Valley Bank’s parent company, its chief executive officer and its chief financial officer, alleging that the company failed to disclose the risks future interest rate increases would have on its business.
The lawsuit against SVB Financial Group, CEO Greg Becker and Chief Financial Officer Daniel Beck was filed in the United States District Court for the Northern District of California. It is seeking unspecified damages to be awarded to those who invested in SVB between June 16, 2021 and March 10, 2023.
The shareholder lawsuit led by Chandra Vanipenta says that some of SVB’s quarterly and annual financial reports did not fully account for the Federal Reserve’s warnings about interest rate hikes.
In particular, the lawsuit said that the annual reports for 2020 through 2022 “understated the risks it posed to the company by failing to disclose that likely interest rate increases, as described by the Federal Reserve, had the potential to cause harm.” irreparable to the company”. stated the claim.
It also claims that the company “failed to disclose that, if its investments were adversely affected by rising interest rates, it was particularly susceptible to a bank run.”
Silicon Valley Bank’s collapse has rocked the tech industry and worried small businesses and people with deposits at the financial institution. The Biden administration’s decision to insure all Silicon Valley Bank deposits above the insured limit of $250,000 per account has brought relief to some.
Silicon Valley quickly established itself as the go-to place for venture capitalists looking for financial partners more open to unconventional business propositions than their larger, more established peers who were not yet tech-savvy.
Venture capitalists set up their accounts at Silicon Valley Bank just as the tech industry began its boom and later advised the entrepreneurs they funded to do the same.
That congenial relationship came to an end when the bank disclosed a loss of $1.8 billion on low-yielding bonds it bought before interest rates began to rise last year, raising alarm bells among its financially savvy customer base. that they used the fruits of technology to spread warnings that it turned into a calamitous run on deposits.
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