SVB’s new owner, First Citizens, is suing HSBC over the hiring of bankers

Silicon Valley Bank’s new owner is suing HSBC and several former employees for more than $1 billion, alleging that the group “devised a scheme to extort senior bankers and confidential information” from SVB.

First Citizens, which bought SVB after its dramatic failure, claims in the lawsuit that HSBC and a former senior SVB banker coordinated a scheme dubbed “Project Colony” to strip it of its “core.” [SVB’s] profitability engine”.

SVB collapsed in early March after bleeding tens of billions of dollars in deposits from venture capitalists and start-ups spooked by losses in its securities portfolio. The bank’s failure in the United States also brought down its UK subsidiary, and days later HSBC agreed to buy the bankrupt British entity from the Bank of England for a nominal price of £1.

David Sabow, the chief executive of SVB in the US, joined HSBC “within days” of the UK deal, according to the lawsuit filed in California federal court.

The lawsuit alleged that Sabow became the “principal architect” of a scheme that lured more than 40 SVB employees to HSBC. According to First Citizens, these former employees collectively maintained the relationships and detailed customer information that gave the Silicon Valley lender an edge in tech clients.

Based on SVB data, Sabow projected that the new unit of bankers he wanted to poach could generate $66 million in profits in the first year, which could rise to nearly $1.3 billion in the fifth year, according to the complaint.

To carry out “Project Colony,” Sabow identified six high-ranking bankers at SVB, who in turn were allowed to bring other employees with them, according to the lawsuit, which also alleges that Sabow offered “large fortunes” to the defectors.

As a result, on the evening of Easter Sunday, April 9, 42 employees submitted their resignations with immediate effect within 30 minutes, the complaint states.

HSBC declined to comment.

First Citizens had purchased SVB from the US Federal Deposit Insurance Corporation just two weeks earlier. The North Carolina-based bank previously said it wanted to maintain SVB’s close ties to the tech and start-up community on the West Coast.

In its complaint, the bank claimed that its efforts to do so were undermined by the defection of SVB executives and that the concerted resignation of dozens of bankers constituted a breach of fiduciary and fiduciary duties.

“Defendants’ theft and misappropriation of confidential, proprietary and trade secret information, disruption of First Citizens’ business, unfair competition and unlawful conduct are reprehensible and require significant compensatory and punitive damages in an amount to be proven at trial. more than $1 billion,” the suit says.

In the lawsuit, First Citizens warned that the defection of dozens of bankers from a failed institution could lead to an undermining of financial stability.

“If they want to be stable banks [incentivised] “To save failed banks and restore financial stability, opportunistic competitors and insiders cannot take over and reproduce the bank’s assets – the highly sensitive confidential, proprietary and trade secret information – before the resolution is implemented,” the statement said.