Allegations of Fraud Rock Signature Bank
On March 14, a storm hit the banking world when a class action lawsuit was filed against Signature Bank, which recently shuttered its doors. Shareholders, led by Matthew Schaeffer, are now pointing fingers at former CEO Joseph DePaolo and his executive team for allegedly engaging in fraud. Their crime? Making bold claims about the bank’s financial health just days before it was seized by regulators.
Misleading Statements and Seizure
According to reports, Signature Bank purportedly misled investors by stating it was “financially strong” merely days before the state took action. Talk about bad timing! The lawsuit claims that the bank was trying to quell anxieties that arose from the fallout seen at Silicon Valley Bank, which had its own dramatic meltdown shortly before, courtesy of the Federal Deposit Insurance Corporation.
Seeking Damages for Shareholders
The lawsuit is pursuing unspecified damages for shareholders who held stock during the tumultuous window from March 2 to March 12. Plaintiffs allege that the bank’s leadership concealed its vulnerability by denying any issues while simultaneously claiming it had enough capital to handle the ‘tough times’ that were evidently just around the corner.
The Fallout from Regulators
As regulators scrambled to protect the economy, they decided to safeguard depositors. Those banking with Signature and Silicon Valley Bank will see their deposits returned in full, regardless of account balances. However, the same can’t be said for shareholders – sorry guys, you’re on your own!
Always Looking for Answers
Amid the chaos, former U.S. Representative Barney Frank, a board member at Signature, weighed in with his take. He suggested that the bank is now viewed as the poster child for this downfall and that regulators may have used the closure as a way to communicate an anti-crypto sentiment. Frank contended that the only serious issue was a rush of $10 billion in withdrawals, and there wasn’t really any insolvency lurking in the shadows.
“I think part of what happened was that regulators wanted to send a very strong anti-crypto message,” Frank said on CNBC.
