Dive Brief:
- The recently closed Signature Bank is facing an investor lawsuit accusing it of violating federal securities laws by recently making misleading statements about the company’s business and operations.
- The putative class action brought by plaintiff Matthew Schaeffer also names as defendants the bank’s CEO Joseph DePaolo, CFO Stephen Wyremski and COO Eric Howell. Schaeffer is represented by the Rosen Law Firm.
- The federal complaint filed Tuesday in the Eastern District of New York takes aim in large part at a March 9 press release the New York City-based bank released in which it said it was in strong financial position. “The March 9 Update overstated the Company’s market position, given that just a few days later, it was shut down by the New York Department of Financial Services,” the lawsuit said.
Dive Insight:
Schaeffer’s suit is likely to be one of many filed in the aftermath of the recent events at Signature Bank and Silicon Valley Bank.
On Monday, an investor lawsuit was filed against SVB Financial Group following Silicon Valley Bank’s closure by regulators on Friday.
Meanwhile, the March 9 press release from Signature Bank criticized in Schaeffer’s complaint contained statements from DePaolo, the CEO, and Howell, the COO/president.
“We want to make it clear again that Signature Bank is a well-diversified, full-service commercial bank with more than two decades of history and solid performance serving middle market businesses,” DePaolo said in the release. “We have built a strong reputation serving commercial clients through nine business lines and reached in excess of $100 billion in assets by continually executing our single-point-of-contact, relationship-based model where banking teams are capable of meeting all client needs.”
Additionally, Howell said in the release: “As shown by our current metrics, we intentionally maintain a high level of capital, strong liquidity profile and solid earnings, which continues to differentiate us from competitors, especially during challenging times.”
The class-action lawsuit said these were among the statements that were “materially false and/or misleading because they misrepresented and failed to disclose the following adverse facts pertaining to the Company’s business, operations, and prospects, which were known to Defendants or recklessly disregarded by them.”
The complaint said the defendants failed to disclose Signature Bank “did not have the strong fundamentals that it represented itself as having in the days immediately prior to its takeover, or otherwise took action that left it susceptible to a takeover by the New York Department of Financial Services.”
On Sunday, March 12, the Department of Financial Services announced that in order to protect depositors it had taken possession of Signature Bank.
Signature Bank did not immediately respond to a request for comment Tuesday.
Signature Bank had 40 branches across the country in New York, California, Connecticut, North Carolina, and Nevada, according to the FDIC.
