(Reuters) — The FDIC on Thursday sued 17 former Silicon Valley bank executives and directors for alleged gross negligence and breaches of fiduciary duty that contributed to the bank's collapse in March 2023, one of the nation's largest bank failures. It sought recovery of billions of dollars.
In a complaint filed in San Francisco federal court, the bank's trustee, the FDIC, said the defendants violated basic standards of sound banking practice in forcing the bank to take on excessive risks to increase short-term profits. It said the bank ignored its own risk policies. Its stock price.
The FDIC accused the bank of relying too heavily on unhedged, interest rate-sensitive long-term government bonds, such as U.S. Treasuries and mortgage-backed securities, as interest rates are likely and ultimately will rise. .
The company also paid a “highly imprudent” $294 million dividend to its parent company in December 2022, less than three months before bankruptcy, depleting it of necessary capital “at a time of financial hardship and deterioration.” He also opposed the payment of
“SVB is a prime example of gross mismanagement of interest rate and liquidity risk by the bank's former officers and directors,” the complaint states.
Defendants include former Chief Executive Officer Gregory Becker, former Chief Financial Officer Daniel Beck, four other former executives, and 11 former directors.
Becker's lawyer was traveling Thursday and unavailable for comment, a spokeswoman said.
Lawyers for former chief risk officer Laura Izurrietta say it is “outrageous” to name her as a defendant, saying she had put in place proper risk management before resigning in April 2022, long before the bank's collapse. He said he was offering advice on the matter.
“Their actions reflect the outgoing FDIC leadership's lack of interest in the truth,” Izrieta's attorney said.
Lawyers for the other defendants did not respond to requests for comment.
The failure of Silicon Valley Bank on March 10, 2023 and its seizure by the FDIC shocked financial markets.
It upset many technology startups and many customers because an unusually large percentage of their deposits were uninsured.
The failure foreshadowed the failures of two other banks, Signature Bank and First Republic Bank, and raised concerns about a repeat of the 2008 banking crisis.
North Carolina lender First Citizens Bancshares acquired Silicon Valley Bank's deposits and tens of billions of dollars in loans in a sale arranged by the FDIC.
Silicon Valley Bank had approximately $209 billion in assets at the time of its failure. Larger U.S. bank failures include Lehman Brothers in 2008, Washington Mutual in 2008, and First Republic in 2023.
The case is litigated in Becker et al., U.S. District Court for the Northern District of California, No. 25-00569, with the FDIC as trustee.
