Suit filed against SVB, top officers
Collapse has shaken technology industry
A class-action lawsuit is being filed against the parent company of Silicon Valley Bank, its CEO and its chief financial officer, saying that the 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 2020-2022, “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 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.
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.