Signature Bank, a U.S.-based bank that was known for being a crypto-friendly institution, collapsed in March 2023. This happened after federal regulators stepped in and closed the bank, citing concerns about its exposure to the volatile cryptocurrency market. The bank’s collapse was preceded by the closure of Silicon Valley Bank, another crypto-friendly bank.
Now, investors are taking legal action against former executives at Signature Bank, alleging that they downplayed the bank’s exposure to the cryptocurrency space. The lawsuit claims that despite the significant risks associated with the cryptocurrency industry, the bank consistently assured investors of the safety of its crypto-related deposits.
The lawsuit goes back to 2020, but comments made by former CEO Joseph DePaolo during a 2022 earnings call are also being scrutinized. DePaolo stated that the crypto sector was stabilizing and that the bank was ready to handle any fallout. However, following the collapse of Silicon Valley Bank in the fall of 2022, Signature Bank claimed that its digital asset deposits had remained stable.
The lawsuit seeks damages for investors who purchased shares between April 2020 and March 2023. Also, the allegations against the bank’s former executives highlight the importance of transparency and accurate disclosure.
The collapse of Signature and Silicon Valley Bank has also raised questions about regulatory oversight in the crypto industry and the need for stronger protections for investors.
