Top finance consultants sued over SVB collapse

Auditors and underwriters like KPMG LLP, Bank of America, Goldman Sachs Group, Keefe, Morgan Stanley, and Bruyette & Woods, have been sued due to alleged misstatements that led to the SVB collapse.

A fresh lawsuit has been reportedly filed against Silicon Valley Bank’s (SVB) auditor KPMG LLP along with underwriters such as Bank of America, Goldman Sachs Group, Keefe, Morgan Stanley, and Bruyette & Woods, due to alleged misstatements that heralded the collapse. According to a Bloomberg report, the lawsuit was filed in San Francisco federal court and is the first of its kind to file an accusation against bank auditors and underwriters.

The lawsuit filed on Friday supposedly accuses underwriters of releasing deceptive registration statements on the bank’s stock offerings that comprised “untrue statements of material facts.” As per the suit, KPMG allegedly signed off on SVB’s yearly reports a couple of weeks before the deadline on March 8th, when the bank was looking to raise 2.25 billion dollars to address its liquidity issues. Later, the bank went on to reveal an approximate loss of 1.8 billion dollars incurred during the sale of its securities.

“Even though SVB’s deposits began to decline in 2022, falling 25 billion dollars during the final nine months of 2022 and reducing SVB’s liquidity, KPMG did not identify risks associated with SVB’s declining deposits or SVB’s ability to hold debt securities to maturity in its report,” as per the lawsuit.

The main reason cited for the SVB collapse is overinvestment in bonds whose values tanked in the wake of interest rate hikes. The American bank’s fate was sealed when many investors scurried to withdraw their deposits, leading to a sell-off of bank assets at a loss. Therefore, SVB’s holding company had to file for Chapter 11 bankruptcy.

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