A class action lawsuit seeking damages alleges that a technology-focused bank failed to disclose risks from rising interest rates.
The parent company of Silicon Valley Bank and two senior executives are facing a class action lawsuit in the United States, where shareholders have accused the financial institution of failing to disclose the risks involved. increase interest rates on his business.
The lawsuit, filed in federal court in the Northern District of California on Monday, seeks unspecified damages from SVB Financial Group and its chief financial officer Daniel Beck, as well as CEO the bank Greg Becker.
The bank collapsed and its assets were seized by the US government late last week after customers made massive withdrawals.
The lawsuit, which accuses SVB of violating federal securities laws, noted that the Federal Reserve, the US central bank, had indicated as early as 2021 that it would raise interest rates to to tame the inflation.
Lawyers for the shareholders said in the filing that the annual bank reports “give an understanding of the risks involved in the company by not disclosing the possibility of an increase in interest rates, as interpretation by the Fed, cause irreparable damage to the company”.
Class action lawsuits allow plaintiffs to sue on behalf of a larger group of similarly situated people, in this case SVB shareholders. The main plaintiff in the lawsuit is Chandra Vanipenta, who the legal filing said bought shares in the company at “artificially inflated prices”.
“If the plaintiff and other members of the Class had been aware that the market price of the company’s securities had artificially and fraudulently increased, … the lawsuit said.
SVB Financial Group did not immediately respond to Al Jazeera’s request for comment.
SVB was the 16th largest bank in the US when it collapsed on Friday. Specializing in lending to new technology companies and the venture capitalists who fund them, they had invested much of their money in US government bonds, which had fallen in value as interest rates rise.
SVB’s failure was followed by the collapse of Signature Bank, another US financial firm, raising fears of a wider economic downturn similar to the 2008 financial crisis.
The administration of US President Joe Biden moved quickly to respond to the banking failures, with his government guaranteeing the money of all depositors at the two banks, even those who did not have insurance.
“This step will ensure that the U.S. banking system continues to fulfill its critical responsibilities of protecting investments and providing access to credit to households and businesses in a way that promotes strong and sustainable economic growth,” the groups said. US government finances in a joint statement on Sunday.
A day later, Biden also pushed to reaffirm confidence in the US banking system, saying, “Americans can rest assured that our banking system is safe.”
Banking stocks showed signs of recovery on Tuesday after falling in recent days.
Reporting from New York City, Al Jazeera’s Gabriel Elizondo said the Biden administration’s moves to quell investor concerns appeared to be working.
“What the market is basically signaling here is that it looks like the worst is over and that this will not spread to the broader US banking sector – at least not yet,” he said. Elizondo.
