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On March 13, the shareholders sued the parent company of Silicon Valley Bank and some of its executives following the recent crisis that has unfolded.
The shareholders are alleging fraud by the bank, its CEO Greg Becker, and its chief financial officer, Daniel Beck. This lawsuit is expected to be one of the first to be filed in court since California regulators shut the bank down on March 10. This closure led to the temporary de-pegging of USD Coin from the dollar amid reports that Circle, which manages the USD Coin, had over $3 billion of the stablecoin’s reserves at Silicon Valley Bank.
The shareholders have claimed that SVB, Becker, and Beck intentionally hid information regarding the firm’s interest rates, which increased the risk of a bank run. According to the shareholders, the bank’s public statements failed to disclose the full extent of the risks associated with the likely interest rate hikes outlined by the Federal Reserve and might cause irreversible harm to the company.
Regulatory bodies, investors, and industry experts are releasing updates on the ongoing crises involving Signature Bank, Silicon Valley Bank, and Silvergate Bank. Several crypto companies, including BlockFi, which is currently undergoing bankruptcy proceedings, and Gemini, have reported having adequate funds to mitigate their exposure to the impacted banks, or no exposure at all.
Regional Banks in the U.S. experience significant volatility, and trading halts
Over the weekend and into March 13, several regional banks in the United States experienced significant volatility and falling prices, resulting in trading being temporarily halted for dozens of banks. The Wall Street Journal reported that First Republic Bank, which saw its stock drop by 65%, was one of the worst affected and had its trading halted. Other banks that had their trading halted because of significant losses included PacWest Bancorp (down 25%), Zions Bancorp (down 25%), and Regions Financial (down 9%).
When trading resumed, some banks, such as Regions Financial and Zions Bancorp, saw a rebound in their prices, while others only saw slight increases. However, several other banks continued to trade significantly lower, with KeyCorp down 29.02% and Huntington Bancshares down 18.96% at midday on the United States East Coast, as reported by Fox News. Charles Schwab also experienced a decline of 9.5% after its trading was halted and resumed.
As the regional banks in the U.S. experienced significant losses and trading halts, the larger banks, such as Citigroup and JPMorgan Chase, saw smaller losses of 7.3% and 1.3%, respectively, at the time of writing. Meanwhile, the S&P 500, Dow, and Nasdaq were all slightly up.
Before the opening of the markets on March 13, U.S. President Joe Biden made a statement on the economy, assuring the public that the banking system is safe and deposits will be secure without any losses borne by taxpayers. However, he also stated that it would terminate the management of failed banks taken over by the FDIC, and those responsible for the failures would face prosecution. In contrast, it would not protect investors in the failed banks as they willingly took risks.
The banking crisis may also have implications for the crypto industry, as the failed Silvergate and Signature banks were known for being crypto-friendly, in contrast to many traditional banks. Even after prices stabilize, this could impact the industry in the future.
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