Complaint Claims Signature Bank, Officials ‘Downplayed’ Crypto Risks
This is at least the second proposed class action filed by Signature stockholders since regulators shut down the bank on March 12.
Pomerantz LLP has filed a proposed class-action suit against Signature Bank and its former executives in Brooklyn federal court, arguing that Signature downplayed the risks it faced from its involvement in the cryptocurrency industry.
The complaint, filed March 31 in the U.S. District Court for the Eastern District of New York, is at least the second proposed class action filed by Signature stockholders since regulators shut down the bank on March 12.
In the March 31 complaint, Pomerantz partner J. Alexander Hood II argued that the bank and its former leaders “made materially false and misleading statements regarding the bank’s business, operations, and prospects” in the period leading up to the closure.
“Notwithstanding the volatility of cryptocurrency, Signature Bank consistently assured investors of the soundness of its crypto-related deposits and downplayed any risks associated with its lopsided exposure to the cryptocurrency industry, claiming that the Bank was carefully managing its balance sheet and bolstering its compliance department,” Hood wrote.
After the collapse of FTX in November, Signature allegedly began “working to reduce, to some degree, the bank’s relationship with the cryptocurrency industry,” Hood wrote, while the bank’s then-president and COO insisted the bank would still be involved in the cryptocurrency space, but “in a much more thoughtful way.”
In late 2022, digital-asset clients accounted for more than a fifth of Signature’s deposit base, Hood alleged.
The proposed class includes people who purchased Signature Bank securities between April 23, 2020, and March 12, 2023, when the FDIC transferred the bank’s assets to a bridge bank under government operation.
That’s a much broader time period than the earlier class-action suit filed against Signature in Brooklyn federal court. In that suit, which was filed by Phillip Kim and Laurence M. Rosen of The Rosen Law Firm two days after the bank closure, the proposed class included people who bought securities between March 2 and March 12.
Both complaints noted that Signature made a failed attempt to reassure investors on March 9, after the run on Silicon Valley Bank.
“Signature Bank issued a press release to reiterate the supposed strength of the bank’s financial position, citing its ‘well-diversified financial position and limited digital-asset-related deposit balances in the wake of industry developments,’” Hood wrote. “Yet Signature Bank’s reassurances proved insufficient.”
Signature and its former executives have yet to enter an appearance in either suit.
Hood declined to comment on the complaint.
From: New York Law Journal