The US Department of Justice and the Securities and Exchange Commission are investigating the collapse of the Silicon Valley bank. The Wall Street Journal It will be reported with reference to people familiar with the issue.
The Santa Clara, Calif.-based tech and startup-focused lender was seized by regulators Friday in a run on deposits, making it the second-largest bank failure in U.S. history.
It’s not unusual for such investigations to occur when major financial institutions or public companies collapse or suffer unexpected losses, but separate probes have also looked into stock sales by company executives days before the bank failed.
Shares of SVB Financial Group, which previously owned the bank, plunged 60 percent last week and were suspended from trading on Friday.
The Magazine The DOJ says fraud prosecutors based in Washington and San Francisco are involved in the investigation.
SVB Financial Group CEO Greg Becker and CFO Daniel Beck did not respond to the newspaper’s request for comment, and there was no statement from any government agency.
In addition, a class-action lawsuit was filed against the company, as well as Mr. Becker and Mr. Beck, which said the company failed to disclose the risks to its business of future interest rate increases.
The complaint was filed in the US District Court for the Northern District of California. It seeks unspecified damages awarded to those who invested in SVB between June 16, 2021 and March 10, 2023.
In a shareholder lawsuit led by Chandra Vanipenta, SVB claims some of its quarterly and annual financial statements did not fully reflect the Federal Reserve’s interest rate hike warnings.
In particular, the lawsuit says, the annual reports for 2020-2022 “minimize the risks to the company by not disclosing that an increase in interest rates set by the Fed could cause irreversible harm to the company.” a lawsuit was filed.
It also claims that the company “did not disclose that it was particularly inclined to bank management if its investments were adversely affected by rising interest rates.”
With additional reporting by the Associated Press.