In a lawsuit filed Thursday, the FDIC sought billions of dollars from 17 former Silicon Valley Bank executives and directors for alleged gross negligence and fiduciary duty violations that led to the bank’s collapse in March 2023, one of the worst financial failures in U.S. history.
The FDIC, acting as the bank’s receiver, claimed in a complaint filed in federal court in San Francisco that the defendants disregarded the bank’s own risk rules and basic prudent banking principles by permitting the bank to take on excessive risks to increase short-term profit and stock price.
Since interest rates appeared to rise and subsequently did, the FDIC criticized the bank for its excessive reliance on unhedged, interest rate-sensitive long-term government bonds, including U.S. Treasury bonds and mortgage-backed securities.
Less than three months before its collapse, in December 2022, it also protested the payment of a “grossly imprudent” $294 million dividend to its parent company, which depleted necessary resources “at a time of financial distress and management weakness.”
Laptops 1000“SVB represents a case of egregious mismanagement of interest rate and liquidity risks by the bank’s former officers and directors,” the complaint stated.
Eleven former directors, four additional former executives, former Chief Financial Officer Daniel Beck, and former Chief Executive Gregory Becker are among the defendants.
Laura Izurieta’s attorneys criticized the inclusion of her as a defendant as “outrageous,” arguing that she provided wise counsel on risk management before her resignation in April 2022, which was far before the bank’s demise.
“Their actions are reflective of outgoing FDIC leadership that is not interested in the truth,” Izurieta’s attorneys stated.
Financial markets were surprised when Silicon Valley Bank collapsed and was taken over by the FDIC on March 10, 2023.
Due to an abnormally high proportion of its deposits being uninsured, it offended many consumers and disrupted numerous technological businesses whose money it held.
