NEW YORK, March 31, 2023 (GLOBE NEWSWIRE) -- Pomerantz LLP announces that a class action lawsuit has been filed against Signature Bank (“Signature Bank” or the “Bank”) (NASDAQ: SBNY; SBNYP), and certain officers. The class action, filed in the United States District Court for the Eastern District of New York, and docketed under 23-cv-02501, is on behalf of a class consisting of all persons and entities other than Defendants that purchased or otherwise acquired Signature Bank securities between April 23, 2020 and March 12, 2023, both dates inclusive (the “Class Period”), seeking to recover damages caused by Defendants’ violations of the federal securities laws and to pursue remedies under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 promulgated thereunder, against the Bank and certain of its top officials.
If you are a shareholder who purchased or otherwise acquired Signature Bank securities during the Class Period, you have until May 15, 2023 to ask the Court to appoint you as Lead Plaintiff for the class. A copy of the Complaint can be obtained at www.pomerantzlaw.com. To discuss this action, contact Robert S. Willoughby at newaction@pomlaw.com or 888.476.6529 (or 888.4-POMLAW), toll-free, Ext. 7980. Those who inquire by e-mail are encouraged to include their mailing address, telephone number, and the number of shares purchased.
[Click here for information about joining the class action]
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the Bank’s business, operations, and prospects. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that: (i) Signature Bank had failed to acknowledge the inherent volatility of digital-asset (i.e., cryptocurrency) related deposits; (ii) accordingly, the Bank had overstated the stability and/or sustainability of its deposit base; (iii) the degree of Signature Bank’s concentration in the cryptocurrency industry significantly undermined the health of its balance sheet; (iv) as a result of the foregoing, Signature Bank was exceptionally vulnerable to a bank run and/or a liquidity crisis; (v) the foregoing placed Signature Bank at a heightened risk of failure and/or regulatory takeover; and (vi) as a result, Defendants’ public statements were materially false and/or misleading at all relevant times.
Signature Bank was co-founded in 2001 by Defendants Scott A. Shay and Joseph DePaolo (“DePaolo”), along with John Tamberlane, the Executive Vice Chairman of the Bank’s Board of Directors. The Bank relied on a network of private client banking teams and offered commercial banking products and services, with veteran bankers acting as a single point of contact for all client needs. As it established itself, Signature Bank cultivated a reputation of working with wealthy clients, including privately owned businesses, law offices, and real estate buyers.
By 2018, Signature Bank was taking significant cash deposits from the growing cryptocurrency industry. Gemini Trust Company, LLC, a privately-owned cryptocurrency exchange launched in 2014 by Cameron and Tyler Winklevoss, Coinbase Global Inc., another major cryptocurrency exchange, and Circle Internet Financial Ltd., the issuer of the USDC stablecoin, all became Signature Bank clients.
Signature Bank publicly embraced the cryptocurrency industry and touted its role in the Bank’s future. On a 2018 conference call, Defendant DePaolo, Signature Bank’s Chief Executive Officer, told investors and analysts that “[t]he opportunity is significant, if you’re dealing with the right clients,” and “[b]lockchain technology is the future[.] [. . .] You don’t want to be caught short, because in five years a number of banks will not be around because of blockchain technology.”
Yet by 2018, the cryptocurrency industry had already proven itself to be incredibly volatile. Between 2011 and 2018, the price of Bitcoin, the world’s largest cryptocurrency by market capitalization and the bellwether of the cryptocurrency market, experienced at least five major price crashes: (1) in June 2011, falling 99%; (2) in August 2012, falling 56%; (3) in April 2013, falling 83%; (4) in December 2013, falling 50% (in a period of just 24 hours); and (5) in December 2018, falling 84%. More recently, in the second quarter of 2022, the price of Bitcoin dropped 56.27% to its lowest value in over a decade. By the end of the quarter on June 30, 2022, Bitcoin’s price fell from approximately $45,000 at the start of the quarter to slightly above $19,000.
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. On an April 2021 conference call, Defendant DePaolo stated that the Bank’s deposits were “sticky”—that is, likely to be renewed or rolled over by the customer as part of the Bank’s funding, including under conditions of stress, and thus beneficial to Signature Bank’s balance sheet. Ultimately, by late 2022, digital-asset clients represented more than one fifth of Signature Bank’s deposit base.
In November 2022, the cryptocurrency exchange FTX collapsed among allegations of fraud and mishandled customer funds, resulting in a wide-ranging disruption of the cryptocurrency markets. FTX’s collapse purportedly prompted Signature Bank to begin working to reduce, to some degree, the Bank’s relationship with the cryptocurrency industry. On December 6, 2022, Bloomberg reported that “Signature Bank plans to continue providing banking services to cryptocurrency firms even as it seeks to remove $8 billion to $10 billion of deposits from its balance sheet,” but quoted Defendant Eric Howell, Signature Bank’s President and Chief Operating Officer, as stating, in relevant part, that “[w]e’re not exiting the space. We don’t know who the winners and losers are going to be. We don’t particularly care,” and “[w]e’re going to be involved [in the cryptocurrency industry] but we’re going to be involved in a much more thoughtful way moving forward.”
Then, on March 8, 2023, Silvergate Bank (“Silvergate”) announced that it would voluntarily wind down its operations. Although Silvergate cited losses suffered in its loan portfolio—a consequence of the Federal Reserve’s aggressive interest rate hikes and ensuing decline in the value of U.S. Treasury securities—the collapse of FTX, a major customer, had significantly undermined Silvergate’s financial stability, as had Silvergate’s lopsided exposure to the volatile cryptocurrency industry more generally. As Bloomberg succinctly reported on March 10, 2023, “Silvergate’s demise was the result of a straightforward bet on cryptocurrencies, particularly large deposits and other business from crypto exchanges. FTX was one of the bank’s largest customers.”
Just two days later, on March 10, 2023, following a bank run, Silicon Valley Bank (“SVB”) was seized by the California Department of Protection and Innovation and placed under the receivership of the Federal Deposit Insurance Corporation (“FDIC”). Whereas Silvergate was known for its relationship with the cryptocurrency industry, SVB was known for servicing the needs of the tech industry.
Taken together, the collapses of Silvergate and SVB, both of which were smaller banks with excessive concentration in specific industries, highlighted the specific risks associated with banks with similar concentration and liquidity profiles—i.e., like Signature, given its own concentration in the cryptocurrency industry. Accordingly, in response to the two bank failures, on March 9, 2023, 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.”
Yet Signature Bank’s reassurances proved insufficient. On March 10, 2023, given the Bank’s close association with the cryptocurrency industry, Signature Bank customers withdrew more than $10 billion in deposits.
On March 12, 2023, the New York Department of Financial Services (“DFS”) announced that, in order to protect depositors and pursuant to Section 606 of the New York Banking Law, DFS had taken possession of Signature Bank. DFS further stated that it was “in close contact with all regulated entities in light of market events, monitoring market trends, and collaborating closely with other state and federal regulators to protect consumers, ensure the health of the entities we regulate, and preserve the stability of the global financial system.”
In a Joint Statement issued that same day (the “Joint Statement”), Federal Reserve Chair Jerome Powell, Treasury Secretary Janet Yellen, and FDIC Chair Martin Gruenberg, followed up on DFS’s announcement. The Joint Statement announced, in relevant part, that the foregoing individuals were “announcing a [] systemic risk exception for Signature Bank [. . .] which was closed today by its state chartering authority. All depositors of this institution will be made whole. As with the resolution of Silicon Valley Bank, no losses will be borne by the taxpayer” and that “[s]hareholders and certain unsecured debtholders will not be protected. Senior management has also been removed. Any losses to the Deposit Insurance Fund to support uninsured depositors will be recovered by a special assessment on banks, as required by law.”
Also on March 12, 2023, trading in the Bank’s shares were halted, essentially rendering the Bank’s shares illiquid—and, given the Bank’s failure, valueless.
On March 20, 2023, Flagstar Bank, N.A, the wholly owned subsidiary of New York Community Bancorp Inc., acquired $12.9 billion of Signature Bank’s loans and assumed $38.4 billion in deposits. Flagstar also acquired all of Signature Bank’s branches, which are now operated under the Flagstar name.
Finally, on March 28, 2023, Signature Bank’s common and preferred stock were delisted from trading on the NASDAQ Exchange.
Pomerantz LLP, with offices in New York, Chicago, Los Angeles, London, Paris, and Tel Aviv, is acknowledged as one of the premier firms in the areas of corporate, securities, and antitrust class litigation. Founded by the late Abraham L. Pomerantz, known as the dean of the class action bar, Pomerantz pioneered the field of securities class actions. Today, more than 85 years later, Pomerantz continues in the tradition he established, fighting for the rights of the victims of securities fraud, breaches of fiduciary duty, and corporate misconduct. The Firm has recovered numerous multimillion-dollar damages awards on behalf of class members. See www.pomlaw.com
CONTACT:
Robert S. Willoughby
Pomerantz LLP
rswilloughby@pomlaw.com
888-476-6529 ext. 7980
