FDIC indicts 17 former Silicon Valley bank executives and directors in bankruptcy

By Jonathan Stempel

(Reuters) – The FDIC on Thursday sued 17 former Silicon Valley bank executives and directors over billions of dollars.

In the complaint filed in San Francisco federal court, the FDIC, acting as receiver of the bank, alleged that the defendants ignored prudent banking practices and the bank’s risk policies to maximize short-term profits and cause the bank to take excessive risks. Share price.

When rates looked set to — and eventually — rise, the FDIC erred on the side of the bank’s unhedged, interest rate-sensitive long-term government bonds like US Treasuries and mortgage-backed securities.

In December 2022, he objected to a “grossly unconscionable” $294 million payment three months before his death, which had depleted the parent of much-needed capital “at a time of financial crisis and management weakness.”

“SVB is exposed to significant interest rate manipulation and liquidity risk by the bank’s former officers and directors,” the complaint said.

The defendants include former CEO Gregory Baker, former chief financial officer Daniel Beck, four other former executives and 11 former directors.

Baker’s attorney was traveling Thursday and was unavailable for comment, a spokeswoman said.

Lawyers for former chief risk officer Laura Ezurita say she provided sound risk management advice before the bank’s collapse in April 2022, calling her prosecution “disgusting”.

Izurieta’s attorneys said, “Their actions reflect the FDIC’s past leadership and lack of interest in the truth.”

Attorneys for the other defendants did not immediately respond to requests for comment.

Silicon Valley Bank The March 10, 2023 collapse and seizure by the FDIC shocked financial markets.

Deposits have disrupted many tech startups, and upset many customers because of the unusually high amount of deposit insurance.

The failure led to the death of two other banks. Signature Bank (OTC:) and First Republic Bank (OTC: ), and the 2008 banking crisis prompted fears of a resurgence.

First Citizens BancShares, a North Carolina-based lender, acquired tens of billions of dollars in deposits and loans from Silicon Valley Bank in a sale arranged by the FDIC.

When Silicon Valley Bank failed, it had about $209 billion in assets. Major US bank failures include Lehman Brothers in 2008, Washington Mutual in 2008, and First Republic in 2023.

The case is FDIC as Receiver v Baker et al., U.S. District Court, Northern District of California, No. 25-00569.