The Federal Deposit Insurance Corporation (FDIC) has filed a lawsuit against 17 former executives and directors of Silicon Valley Bank (SVB), accusing them of gross negligence and fiduciary duty breaches that led to the bank’s collapse in March 2023. The lawsuit, filed in a San Francisco federal court, aims to recover billions of dollars linked to one of the largest banking failures in U.S. history.
Allegations of Risk Mismanagement
According to the FDIC, which took control of SVB as its receiver, the defendants failed to follow basic banking standards and ignored the bank’s own risk policies. The bank allegedly took on excessive financial risks in pursuit of short-term profits and to inflate its stock price.
A primary factor cited in the lawsuit was SVB’s overreliance on unhedged, interest rate-sensitive long-term investments, such as U.S. Treasury bonds and mortgage-backed securities. These holdings left the bank vulnerable to rising interest rates, which eventually increased and contributed to the bank’s downfall.
The Federal Deposit Insurance Corporation also highlighted a $294 million dividend payout to SVB’s parent company in December 2022, describing it as a financially irresponsible move during a period of financial distress and managerial instability. This payout, made just three months before the bank’s failure, allegedly drained essential capital reserves needed for stability.
Key Figures Named in the Lawsuit
Among the 17 defendants named in the lawsuit are former Chief Executive Officer Gregory Becker, former Chief Financial Officer Daniel Beck, four additional former executives, and 11 former directors.
Becker’s legal representative was reportedly unavailable for comment at the time of reporting.
However, the legal team representing former Chief Risk Officer Laura Izurieta expressed strong disagreement with her inclusion in the lawsuit. They claimed she had provided sound risk management advice before her departure in April 2022, well in advance of the bank’s collapse. Her lawyers argued that the FDIC’s actions reflected leadership uninterested in uncovering the full truth behind the bank’s failure.
Lawyers for the other defendants did not immediately respond to requests for comment.
The Impact of SVB’s Collapse
Silicon Valley Bank’s failure on March 10, 2023, sent shockwaves through financial markets. The collapse disrupted numerous technology startups holding deposits at the bank and left many customers distressed, as a significant portion of the deposits were uninsured.
The bank’s downfall also triggered wider instability in the financial sector, preceding the failures of Signature Bank and First Republic Bank. These events raised fears of a repeat of the 2008 financial crisis.
Following the collapse, First Citizens BancShares, a North Carolina-based lender, acquired SVB’s deposits and tens of billions of dollars in loans through an FDIC-facilitated sale.
The scale of the Failure
At the time of its collapse, Silicon Valley Bank had approximately $209 billion in assets. Other major U.S. banking failures include Lehman Brothers in 2008, Washington Mutual in 2008, and First Republic Bank in 2023.
The FDIC’s lawsuit, officially filed as Federal Deposit Insurance Corporation as receiver v. Becker et al., is being heard in the U.S. District Court for the Northern District of California under case number 25-00569.
The outcome of this high-profile case could set a precedent for how regulatory bodies address executive accountability in the wake of significant banking failures.
