Top Line

Filed by a shareholder of Silicon Valley Bank trial Monday marked what is likely to be a string of lawsuits against the financial firm, just days after it collapsed in the biggest bank failure since 2008, for their role in its collapse.

important facts

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The lawsuit was filed by a shareholder named Chandra Vanipenta, but it seeks class-action status for the shareholders, naming the bank, CEO Greg Baker and CFO Daniel Beck as defendants.

The plaintiffs argue that the executives failed to disclose how rising interest rates would affect the bank’s business, after issuing consecutive reports claiming that it was in a “particularly vulnerable” position to run the bank. The Federal Reserve didn’t cause rate hikes in the previous year. Worry

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Doing so meant that the executives and the company managed to “artificially” inflate the stock price, the suit alleges.

The Federal Deposit Insurance Corp. fired Baker and Beck after the bank collapsed.

The suit identifies shareholders who acquired SVB stock as eligible class members at any point between June 16, 2021, and Friday, the 2021 date that was Federal Reserve Chairman Jerome Powell’s first public indication that the Fed Was planning to raise interest rates in an attempt to pacify. inflation.

SVB did not immediately respond to a request for comment. forbes,

important quotes

“Whether Plaintiffs and other members of the Class knew that the market value of the Company's securities had been artificially and unfairly inflated by misleading statements of the Company and individual defendants . . . that they had acquired the Company's securities at artificially inflated prices; But wouldn't have bought, or wouldn't have bought at all," the suit says.

what we don't know

The exact number of potential class members is unclear, as the lawsuit states: "The class members are so numerous that the summation of all members is impractical."

main background

SVB's stock plunged more than 60% on Thursday after the company announced it sold $21 billion in securities at a loss of $1.8 billion and plans to sell additional stock to raise capital -- suggesting liquidity issues. Venture capital funds then urged SVB clients to withdraw money from the bank, further straining the company, which relied on funding startups as its business model. The sudden collapse has been linked to the Fed's push to curb inflation by raising interest rates: customers deposited hundreds of billions of dollars into the bank over the years, which SVB then invested in mortgage-backed securities and US Treasuries. , when the value was lost. Interest rates went up. Higher interest rates also forced more SVB's tech customers to pull funds as startup funding dwindled. The federal government took control of the bank on Friday, and the Treasury Department has said SVB customers should have access to their full funds on Monday—beyond the typical $250,000 limit the FDIC protects—though shareholders who are in SVB If you keep anything, you will not be able to retrieve it. inventory.

tangent line

The failure of SVB caused stocks to crash in similar regional banks on concerns that they could face a similar fate. Crypto-focused Signature Bank failed on Sunday after customers withdrew funds on Friday. The New York-based regional bank has been in business for 23 years. And First Republic Bank's share price has plunged more than 50% on Monday.

What to know about the collapse of Silicon Valley Bank - the biggest bank failure since 2008 (Forbes)

SVB shut down by California regulator after bank stock crash amid turmoil (Forbes)

FDIC will protect all Silicon Valley bank deposits after sudden collapse, Treasury says (Forbes)

What happened to Signature Bank? Latest bank failure marks third largest in history (Forbes)