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Signature Bank and former executives sued by shareholders for alleged fraud

BusinessCryptoSignature Bank and former executives sued by shareholders for alleged fraud

On March 14, a class action lawsuit was filed against the recently closed crypto-friendly, New York-based Signature Bank, and its former chief executive officer, Joseph Depolo, chief financial officer, Stephen Wyremsky, and chief operating officer, Eric Howell. Was. Reuters for allegedly committing fraud informed of,

Shareholders have accused the bank of falsely claiming to be “financially sound” just three days before it was seized by the state regulator. The lawsuit seeks unspecified damages for shareholders who held the stock between March 2 and 12, 2023.

The lawsuit was filed in federal court in Brooklyn by shareholders led by Matthew Schaefer. It is claimed by the claimants signature bank Concealed its susceptibility to acquisition by making false or misleading statements regarding its health. These statements were allegedly aimed at curbing apprehensions arising out of the troubles faced by them Silicon Valley BankWhich was seized by the Federal Deposit Insurance Corp. two days earlier from Signature Bank.

According to the lawsuit, Signature Bank made statements claiming that it could meet “all customer needs” and had sufficient capital and liquidity to differentiate itself from rivals during “challenging times” and was financially sound. was strong These statements allegedly concealed the true financial position of the bank. The lawsuit was filed by the same law firm that sued Silicon Valley Bank’s parent company, SVB Financial Group, and its CEO and CFO on Monday.

In a bid to boost public confidence in the banking sector and protect the economy, regulators in the United States on Sunday decided to provide full compensation to Signature Bank and Silicon Valley Bank depositors regardless of the balance in their accounts. However, the same protection will not be extended to the shareholders.

RELATED: Marathon Digital: Signature Bank Deposits Are Safe and Available

On March 12, the New York Department of Financial Services (NYDFS) officially closed and acquired New York-based Signature Bank, According to a statement issued by the Federal Reserve on March 12, the decision to close the bank was made in cooperation with the Federal Reserve to protect the US economy and increase public confidence in the banking system.

On March 13, former US Representative Barney Frank, who also happens to be a member of the bank’s board, suggested that the recent closure of Signature Bank was done as part of a seeming show of force. Frank said the only sign of issues at Signature was a $10 billion deposit run on March 10, which he attributed to contagion from the collapse of Silicon Valley Bank.

Frank shared that he believed regulators wanted to send a strong anti-crypto message, even though there was No bankruptcy based on fundamentals, He shared in an interview with CNBC:

“I think part of what happened was that regulators wanted to send a very strong anti-crypto message. […] We became the poster boy because there was no bankruptcy based on fundamentals.”