A lawsuit was brought against SVB Financial Group, CEO Greg Becker, and CFO Daniel Beck in the Northern District of California. It is requesting that investors in SVB between June 16, 2021 and March 10, 2023 get specific damages.
The Federal Reserve's warnings about interest rate hikes were not adequately taken into account in some of SVB's quarterly and yearly financial reports, according to the complaint brought by shareholders led by Chandra Vanipenta.
In particular, the lawsuit argued that annual reports for 2020 through 2022, "understated the dangers posed to the company by not reporting that likely interest rate hikes, as detailed by the Fed, had the potential to create permanent damage to the company," the lawsuit stated.
Additionally, it asserts that the business "failed to disclose that it was particularly susceptible to a bank run if its investments were adversely affected by rising interest rates."
Small businesses and people who had deposits at the financial institution are concerned after Silicon Valley Bank's collapse, which has shook the technology sector. Some people are relieved by the Biden administration's decision to guarantee all Silicon Valley Bank deposits over the insured maximum of $250,000 per account.
Silicon Valley swiftly became known as the "go-to" location for venture capitalists seeking financial partners more receptive to novel business ideas than its larger, more established competitors who were still lagging behind in terms of technology.
Just as the tech sector began to expand, venture investors opened accounts at Silicon Valley Bank and recommended the entrepreneurs they were funding to do the same.
Their friendly relationship came to an end when the bank revealed a $1.8 billion loss on low-yielding bonds bought before interest rates spiked last year. This alarming news sparked a disastrous run on deposits among its tech-savvy customer base.
