Signature Bank, ex-CEO sued by shareholders for fraud

Signature Bank, ex-CEO sued by shareholders for fraud

By Jonathan Stempel

NEW YORK (Reuters) – Signatory Bank and three former top executives were sued on Tuesday by shareholders who falsely declared the New York bank was financially sound just three days before it was seized by a state regulator.

Signature and the proposed class action against its former CEO Joseph DiPaolo, Chief Financial Officer Stephen Wyremsky and Chief Operating Officer Eric Howell were filed in federal court in Brooklyn.

Two days after the Federal Deposit Insurance Corp. seized the Silicon Valley bank, it sought unspecified compensation for shareholders between March 2 and 12 when New York’s Department of Financial Services accepted the signature.

Signature did not immediately respond to requests for comment.

Founded in 1999, Signature specializes in real estate lending and offers many services to law firms, and has made a push into cryptocurrency deposits in recent years. Former US President Donald Trump was a client until 2021.

Signature ended 2022 with $110.4 billion in assets and $88.6 billion in deposits, and is the second-largest US bank to fail since 2008. Silicon Valley Bank is the largest

In Tuesday’s lawsuit, shareholders led by Matthew Schaefer said Signature concealed how it was “susceptible to takeovers” by making false or misleading statements about its health, to assuage fears sparked by the Silicon Valley bank’s problems.

These statements included that Signature could meet “all client needs” and had sufficient capital and liquidity to differentiate itself from rivals in “challenging times”.

Signature’s market value before the decline was about $6.5 billion.

The lawsuit was filed Monday by the law firm suing Silicon Valley Bank’s parent SVB Financial Group and its CEO and CFO.

On Sunday, US regulators decided to fine Signature and Silicon Valley Bank depositors regardless of how much they keep in their accounts.

Shareholders get no protection. Regulators said the move would protect the U.S. economy by strengthening public confidence in banking.

The case is Schaeffer v Signature Bank et al, US District Court, Eastern District of New York, No. 23-01921.

(Reporting by Jonathan Stempel in New York; Editing by Nick Ziminski)

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