Signature Bank and former executives sued by shareholders for alleged fraud

On March 14, a people enactment suit was filed against the precocious unopen down crypto-friendly, New York-based Signature Bank, and its erstwhile main enforcement office, Joseph DePaolo, main fiscal officer, Stephen Wyremski, and main operating officer, Eric Howell, for allegedly committing fraud Reuters reported. 

Shareholders person accused the slope of falsely claiming to beryllium “financially strong” conscionable 3 days earlier it was seized by the authorities regulator. The suit seeks unspecified damages for shareholders who held banal betwixt March 2 and 12, 2023.

The suit was filed successful national tribunal successful Brooklyn by shareholders led by Matthew Schaeffer. The plaintiffs assertion that Signature Bank hid its susceptibility to a takeover by making mendacious oregon misleading statements astir its health. The intent 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 2 days earlier Signature Bank.

According to the lawsuit, Signature Bank made statements claiming that it could conscionable “all lawsuit needs,” and had capable superior and liquidity to separate itself from rivals during “challenging times,” and was financially strong. These statements allegedly concealed the bank's existent fiscal state. The suit was reportedly filed by the aforesaid instrumentality steadfast that sued Silicon Valley Bank's genitor company, SVB Financial Group, and its CEO and CFO connected Monday.

To boost nationalist spot successful the banking assemblage and support the economy, regulators successful the United States made a determination connected Sunday to supply afloat compensation to depositors of Signature Bank and Silicon Valley Bank, careless of the equilibrium successful their accounts. However, the aforesaid protections volition not beryllium extended to shareholders.

Related: Marathon Digital: Deposits held astatine Signature Bank are unafraid and available

On March 12, the New York Department of Financial Services (NYDFS) officially unopen down and took implicit the New York-based Signature Bank.  The determination to adjacent the slope was made successful collaboration with the Federal Reserve to safeguard the U.S. system and summation nationalist assurance successful the banking system, according to a connection released by the Federal Reserve connected March 12.

@federalreserve @USTreasury @FDICgov contented connection connected actions to support the U.S. system by strengthening nationalist assurance successful our banking system, ensuring depositors' savings stay safe: https://t.co/YISeTdFPrO

— Federal Reserve (@federalreserve) March 12, 2023

On March 13, Former U.S. Representative Barney Frank who besides happens to be a committee subordinate of the bank, suggested that the caller closure of Signature Bank was done arsenic portion of a seeming amusement of force. Frank said that the lone motion of issues astatine Signature was a $10 cardinal deposit tally connected March 10, which helium attributed to contagion from the Silicon Valley Bank fallout. 

Frank shared that helium believes regulators wanted to nonstop a beardown anti-crypto message, adjacent though determination was no insolvency based connected the fundamentals. He shared successful an interrogation with CNBC: 

"I deliberation portion of what happened was that regulators wanted to nonstop a precise beardown anti-crypto message. [...] We became the poster lad due to the fact that determination was nary insolvency based connected the fundamentals."