The first of numerous securities fraud cases filed against Silicon Valley Bank, accusing it of mismanaging the circumstances that caused its failure, was filed.
California officials shut the bank and placed it in receivership on Friday. After the company’s unsuccessful effort to sell shares, startups started withdrawing their funds at the urging of venture capital companies.
The lender’s collapse, which was only somewhat well-known outside of Silicon Valley, sent shockwaves through the startup community and increased concern in the banking sector.
SVB’s bonds saw unprecedented falls, while its shares fell 60% on Thursday. Greg Becker, the chief executive officer of SVB, spoke to the bank’s clients on a conference call, including venture capitalists, and pleaded with them to “remain calm” in an effort to prevent a bank run. Becker and Chief Financial Officer Daniel Beck are also listed as defendants in the lawsuit.
The firm was looking for a rescue on Friday after its share sale failed, and the stock was suspended after a steep decline.