FDIC sues over a dozen former SVB executives for mismanagement behind 2023 collapse

The Federal Deposit Insurance Corp. Thursday sued 17 former executives and directors of Silicon Valley Bank, accusing them of gross negligence and breaching fiduciary duties the agency says contributed to the Northern California bank’s historic demise. 

The complaint, submitted to the San Francisco-based District Court for the Northern District of California, accuses the former SVB officials, including the CEO, of ignoring prudent banking standards and violating the bank’s own stated policies to pursue short-term profit and increase SVB’s stock prices.

The FDIC pointed to the bank’s reliance on unhedged, interest rate-sensitive assets, such as long-term U.S. Treasuries and mortgage-backed securities, despite rising interest rates. It also flagged a $294 million dividend paid to the bank’s parent company in December 2022, calling it “grossly imprudent” during a period of financial distress. 

Defendants include SVB’s former CEO Gregory Becker, CFO Daniel Beck and four other executives, alongside 11 former directors. 

SVB’s collapse in March 2023, driven by depositor withdrawals and losses on long-term securities, cost the FDIC’s Deposit Insurance Fund an estimated $23 billion. By the end of 2022, the bank reported $209 billion in assets and $191.4 billion in deposits. However, its rapid growth concealed significant risks, including a heavily concentrated customer base and 94% of deposits being uninsured.

Following the failure — which triggered a regional banking crisis that included the failures of Signature Bank and First Republic Bank — FDIC has since sold SVB’s assets to First Citizens BancShares. With $209 billion in assets, SVB ranks among the largest U.S. banking failures, alongside Lehman Brothers in 2008.

The FDIC’s investigation into the collapse — culminating in the decision to consider legal action — revealed significant failings in SVB’s risk management practices, the agency said. According to the agency, the bank’s former leadership allowed excessive exposure to long-term securities in a rising interest-rate environment, removed crucial safeguards against interest-rate fluctuations and authorized what the FDIC says were imprudent dividend payments to the parent company during financial distress. These decisions compounded SVB’s losses, and the lawsuit being considered by the FDIC would aim to recover these damages.

It’s not uncommon for regulators to sue former bank executives to recoup losses in situations where a bank’s failure is costly to resolve. Legal action involving Biden-appointed bank regulators’ has made news more than once in the last days of the administration. The Office of the Comptroller of the Currency recently fined three former Wells Fargo executives a total of $18.5 million for failing to address widespread sales misconduct — dubbed the “fake-accounts scandal” at the bank between 2013 and 2016.

Thursday’s suit stems from an effort — contemplated by the agency in recent months — to hold SVB’s leaders accountable for mismanagement leading to the bank’s failure. In December 2024, the FDIC board voted to explore legal action against SVB leadership, citing mismanagement of investment portfolios, excessive risk exposure and improper dividend payments to the parent company during financial distress. 

During the board meeting, outgoing FDIC Chair Martin Gruenberg — who has only days left at the agency — highlighted the need for accountability. Consumer groups have praised the agency for taking up legal action as a way to deter future misconduct. 

“As a result of the mismanagement of the held-to-maturity securities portfolio, the termination of interest-rate hedges on the available for sale securities portfolio, and the issuance of the bank-to-parent dividend,” Gruenberg said, “SVB suffered billions of dollars in losses for which the FDIC as Receiver has both the authority and the responsibility to recover.”