Shareholders sued SVB Financial Group (SIVB.O) and two senior executives on Monday, accusing them of hiding how increasing interest rates would make its Silicon Valley Bank arm, which collapsed last week, “especially vulnerable” to a bank run.
The proposed class action lawsuit was filed in federal court in San Jose, California, against SVB, Chief Executive Greg Becker, and Chief Financial Officer Daniel Beck.
It seemed to be the first of several lawsuits over the fall of Silicon Valley Bank, which was seized by US authorities on March 10 after a rise in deposit withdrawals.
SVB had stunned the market two days earlier by revealing a $1.8 billion after-tax loss from investment sales and its intention to raise capital as it hurried to satisfy redemption demands.
Before its demise, Silicon Valley Bank had an estimated $209 billion in assets and $175.4 billion in deposits, making it the greatest bank failure in the United States since the 2008 financial crisis.
Its demise has generated concern among other lenders that serve rich clientele, including technological start-ups and venture capital-backed firms, as well as significant regional banks.
Shareholders headed by Chandra Vanipenta filed the complaint on Monday, alleging that Santa Clara, California-based SVB failed to explain how increasing interest rates will weaken its business model and leave it worse off than banks with diverse customer bases.
Between June 16, 2021, and March 10, 2023, the complaint seeks specific damages for SVB stockholders.
SVB said on Monday that it would investigate strategic options for what remains of the firm, which has been stripped of its primary banking operation.
The case is Vanipenta v. SVB Financial Group et al., No. 23-01097, in the United States District Court for the Northern District of California.