Silicon Valley Bank Hit With First Shareholder Fraud Lawsuit Over Collapse
The securities class action was filed on behalf of Chandra Vanipenta, who bought SVB shares at what he argues were artificially inflated prices due to false statements made by SVB CEO Greg Becker and CFO Daniel Beck.
(Bloomberg) -- Silicon Valley Bank was hit with its first of what will likely be many securities-fraud lawsuits by shareholders, accused of failing to warn of risks to its business model.
The securities class action was filed on behalf of Chandra Vanipenta, who bought SVB shares at what he argues were artificially inflated prices due to false statements made by SVB Chief Executive Officer Greg Becker and Chief Financial Officer Daniel Beck.
SVB Financial Group, the bank’s parent, filed multiple quarterly reports over the last two years that failed to disclose the risk that interest rate hikes posed to the bank, according to the complaint filed Monday in federal court in San Jose, California.
The public statements “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,” according to the complaint.
On Friday, California regulators closed the bank and sent it into receivership. That was after an attempted share sale by the company failed and startups began pulling their funds at the urging of venture capital firms.
The collapse of the lender little-known outside of Silicon Valley has reverberated around the startup world and deepened uncertainty within the financial industry. SVB’s stock plunged 60% Thursday and its bonds posted record declines. Becker held a conference call with the bank’s clients, including venture capital investors, urging them to “stay calm” in a bid to avoid a run on the bank.
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