Breaking: Trouble Grows For Silicon Valley Bank As Shareholders File Lawsuit For Fraud
In the midst of the ongoing crisis, recent reports suggest that a number of shareholders have initiated legal action against the Silicon Valley Bank, its parent corporation and several of the bank’s management. The proposed class action lawsuit was filed in federal court in San Jose, California against SVB, CEO Greg Becker, and CFO Daniel Beck.
Silicon Valley Bank Sued By Investors
The lawsuit would most likely be one of the first to be filed in court after California regulators closed the bank on March 10. This led to the catastrophic de-pegging of one of crypto’s largest stablecoin by market cap, as USD Coin (USDC) gradually started deviating from its $1 value. This occurred in response to reports that Circle had more than $3 billion worth of reserves trapped at the financial institution. At the time of writing, USDC’s price was currently exchanging hands at $0.99 at a market cap of $39 billion.
Read More: U.S. President Biden Claims Investors Of Affected Banks Will Not Be Bailed Out
According to the lawsuit, the shareholders alleged that SVB, Becker and Beck withheld information about the company’s interest rates, which made the firm “particularly susceptible” to a bank run and even artificially inflated their share prices. The official comments 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 Widening U.S. Banking Crisis
Prior to its abrupt collapse, the bank was reported to have assets worth $209 billion and deposits standing at $175.4 billion. With Silicon Valley Bank becoming the largest bank to fail in the United States since the 2008 financial crisis, the complaint asks for unspecified compensation for SVB investors between the time span of June 16, 2021 to March 10, 2023.
Fears of contagion have aroused among other lenders that also cater to wealthy clients as a result of its failure. These clients include technology start-ups, companies supported by venture capital, crypto-focused companies like crypto exchanges as well as significant regional banks. SVB announced on Monday that it is currently investigating potential strategic avenues for the remainder of the company, which has been divested of its primary banking operations.
Also Read: Bitcoin Price And Crypto Stocks Soar Amidst U.S. Banking Crisis; But For How Long?
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