SVB Financial Group, the parent company of Silicon Valley Bank, along with CEO Greg Becker and CFO Daniel Beck, are facing a class-action lawsuit that accuses them of failing to disclose the risks associated with future interest rate increases. The lawsuit, filed in the U.S. district court for the Northern district of California, seeks unspecified damages for investors who put their money into SVB between June 16, 2021 and March 10, 2023.
The plaintiffs, led by Chandra Vanipenta, claim that SVB did not fully account for warnings from the Federal Reserve about interest rate hikes in some quarterly and annual financial reports. Specifically, the lawsuit states that the annual reports for 2020 through 2022 “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.” It further alleges that SVB “failed to disclose that, if its investments were negatively affected by rising interest rates, it was particularly susceptible to a bank run.”
The collapse of Silicon Valley Bank has caused concern among small businesses and individuals with deposits at the financial institution. The Biden administration’s guarantee to cover all deposits above the insured limit of $250,000 per account has provided some relief. Silicon Valley Bank was once a popular choice for venture capitalists seeking financial partners more open to unconventional business proposals than traditional banks. However, after disclosing a $1.8 billion loss on low-yielding bonds purchased before interest rates began to rise, the bank faced a run on deposits.
The class-action lawsuit against SVB Financial Group, Greg Becker, and Daniel Beck highlights the importance of companies disclosing all relevant risks associated with their business. The plaintiffs are seeking justice for investors who put their trust in SVB and suffered damages as a result of the alleged failure to disclose these risks.