Shareholders for the collapsed Silicon Valley Bank have filed a class action lawsuit against the bank’s parent company and its leaders over allegations that they did not disclose how interest rate increases could have an effect on business.
The shareholders, led by Chandra Vanipenta, filed the lawsuit on Monday against SVB Financial Group, former CEO Greg Becker and Chief Financial Officer Daniel Beck to seek unspecified damages for investors who backed the bank between June 16, 2021 and March 10, 2023.
The complaint states that quarterly and annual financial reports from the bank did not take into account warnings that the Federal Reserve gave about raising interest rates.
It also alleges that the 2020 annual report understated that the Fed’s interest rate hikes could cause “irrevocable” damage to the bank.
The complaint comes after a bank run led federal authorities to take over Silicon Valley Bank on Sunday. A lack of liquidity caused the bank to not have enough cash on hand to give to its customers seeking withdrawals, leading to the collapse.
The crash has rattled markets with some concerns that Silicon Valley Bank’s closure could have ripple effects on companies from the technology industry and small businesses.
The Biden administration stepped in when it announced that all individuals who had deposits in the bank would be able to have access to their money on Monday in an effort to calm the markets down. Bank customers are only federally insured up to $250,000 per account under federal law.
The shareholders also allege that the bank violated two sections of the Securities Exchange Act from false statements that leaders made while knowing or deliberately neglecting that they were misleading and from artificially inflating the market value of the company’s assets.
The Hill has reached out to representatives of the now defunct company for comment.
The Associated Press contributed to this report.