Alleging gross negligence and fiduciary duty-related breaches, FDIC moves against former Silicon Valley Bank executives and directors

The Federal Deposit Insurance Corporation (“FDIC”) recently brought lawsuits against 17 former executives and directors of Silicon Valley Bank (“SVB” or the “Bank”), whose sudden implosion in 2023 rattled banks across the United States and caused global capital markets to swoon.  

The defendants named in the complaint, which was filed in a federal court in San Francisco, are alleged to have:

• “ignored clear warnings of risk to the Bank’s financial condition . . . to boost short-term income and its stock price,” and
• overseen the payment of a “grossly imprudent” $294 million dividend to SVB’s parent entity at a time when funding was needed to shore up the Bank’s capital reserves.  

Acting as SVB’s receiver, the FDIC sought for the individuals named in the complaint to be held liable for:

• gross negligence (against the defendants who were SVB directors and officers),
• negligence (against the defendants who were SVB officers), and
• breach of fiduciary duty (against the defendants who were SVB directors and officers), including alleged violations of the duty of care and loyalty under common law and California Corporations Code § 309 (against the defendants who were SVB directors).  

In its court papers, the FDIC was less than restrained about the quality of SVB’s management during the period leading up to its sudden collapse:

• “SVB represents a case of egregious mismanagement of interest-rate and liquidity risks by the Bank’s former officers and directors,”
• “The Bank . . ignored fundamental standards of prudent banking and SVB’s own risk policies in pursuit of short-term profit for SVB Financial Group,”
• “The [$294 million] dividend ‘deprived SVB of essential capital and liquidity, for the sole benefit of SVBFG and its shareholders, at a time when SVB was in financial distress,’” and
• “The officers manipulated risk model assumptions to mask policy breaches instead of addressing these issues.”

To review the FDIC’s complaint in its entirety, see FDIC as Receiver v. Becker et al., No. 5:25‑00569 (N.D. Cal.).  

Are you currently serving as a director or officer of a business entity? Do you have corporate governance-related questions in relation to your duties thereto? If so, contact Castle Garden Law for an introductory conversation to gain greater clarity about such roles.