By Jonathan Stempel
NEW YORK, March 14 (Reuters) – Signature Bank and three former top executives were sued on Tuesday by shareholders who accused the New York-based bank of fraudulently claiming its financial strength just three days before being seized by a regulator of State.
The proposed class action lawsuit against Signature and its former CEO Joseph DePaolo, CFO Stephen Wyremski and COO Eric Howell has been filed in federal court in Brooklyn.
The lawsuit seeks unspecified damages from shareholders between March 2 and March 12, when Signature was taken over by the New York Department of Financial Services, two days after the Federal Deposit Insurance Corporation seized Silicon Valley Bank.
Signature did not immediately respond to requests for comment.
Founded in 1999, Signature has specialized in home loans, provided extensive services to law firms, and in recent years has ventured into cryptocurrency custodians. Former US President Donald Trump had been a customer until 2021.
Signature ended 2022 with $110.4 billion in assets and $88.6 billion in deposits, making it the second largest U.S. bank to fail since 2008. Silicon Valley Bank is the largest.
In Tuesday’s lawsuit, shareholders led by Matthew Schaeffer said Signature hid how “acquisitive” it had been by making false or misleading statements about its financial health, in part to allay fears over the woes of Silicon Valley Bank.
These statements included that Signature could meet “all customer needs” and that it had enough capital and liquidity to distinguish itself from rivals in “difficult times”.
Signature’s market value was around $6.5 billion before its collapse.
The lawsuit was filed Monday by the law firm that sued SVB Financial Group, the parent company of Silicon Valley Bank, and its chief executive and chief financial officer.
(Edited in Spanish by Ricardo Figueroa)