Signature Bank and former executives sued by shareholders for alleged fraud
On March 14, a class action lawsuit was filed against the recently shut down crypto-friendly, New York-based Signature Bank, and its former chief executive office, Joseph DePaolo, chief financial officer, Stephen Wyremski, and chief operating officer, Eric Howell, for allegedly committing fraud Reuters reported.
Shareholders have accused the bank of falsely claiming to be “financially strong” just three days before it was seized by the state regulator. The lawsuit seeks unspecified damages for shareholders who held stock between March 2 and 12, 2023.
The lawsuit was filed in federal court in Brooklyn by shareholders led by Matthew Schaeffer. The plaintiffs claim that Signature Bank hid its susceptibility to a takeover by making false or misleading statements about its health. The purpose of these statements was allegedly to curb fears sparked by the troubles faced by Silicon Valley Bank, which was seized by the Federal Deposit Insurance Corp two days before Signature Bank.
According to the lawsuit, Signature Bank made statements claiming that it could meet “all client needs,” and had enough capital and liquidity to distinguish itself from rivals during “challenging times,” and was financially strong. These statements allegedly concealed the bank's true financial state. The lawsuit was reportedly filed by the same law firm that sued Silicon Valley Bank's parent company, SVB Financial Group, and its CEO and CFO on Monday.
To boost public trust in the banking sector and protect the economy, regulators in the United States made a decision on Sunday to provide full compensation to depositors of Signature Bank and Silicon Valley Bank, regardless of the balance in their accounts. However, the same protections will not be extended
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