Class-Action Lawsuit Alleges Silicon Valley Bank Didn’t Disclose Risk

A lawsuit alleges that Silicon Valley Bank’s parent company did not disclose risk to investors.

The class-action complaint alleges that because of failure to disclose risk, the plaintiffs were damaged when SVB Financial Group sold its securities at “artificially inflated prices” and later released an “alleged corrective disclosure.”

The suit was filed Monday (March 13) in U.S. District Court, Northern District of California, on behalf of people who purchased the company’s publicly traded securities between June 16, 2021, and March 10, 2023.

It names as defendants SVB Financial Group, SVB CEO Greg W. Becker and SVB Chief Financial Officer Daniel Beck.

The suit alleges that in several filings with the Securities and Exchange Commission (SEC), the defendants did not disclose the risk that future interest rate hikes posed to the company’s business, that it would be worse off than other banks in an environment of high interest rates, and that it was particularly susceptible to a bank run if its investments were negatively impacted by high interest rates.

“As a result, defendants’ public statements were materially false and/or misleading at all relevant times,” the suit said.

Then, in a March 8 press release, SVB announced that it sold $21 billion of securities in a move that would cause an after-tax loss of $1.8 billion, according to the suit.

This, in turn, triggered concerns among clients, a plunge in its share price and a liquidity crisis, the suit said.

“It quickly emerged that the culprit behind the liquidity crisis that caused SVB’s eventual collapse was rapidly rising interest rates,” the suit said.

As PYMNTS reported Friday (March 10), SVB Financial Group sold off a chunk of its holdings at a loss and raised $500 million Wednesday to shore up its financial position.

The company said at the time that “we are taking these actions because we expect continued higher interest rates, pressured public and private markets, and elevated cash burn levels from our clients as they invest in their businesses.”

On Friday, a state regulator took possession of the bank and appointed the Federal Deposit Insurance Corporation (FDIC) as its receiver, citing Silicon Valley Bank’s “inadequate liquidity and solvency.”