Key facts
- A U.S. appeals court revived an investor lawsuit concerning the 2023 collapse of Signature Bank.
- The court ruled that the FDIC's seizure of the bank did not remove shareholders' right to pursue legal action.
- The decision allows shareholders, led by the Swedish pension fund Sjunde AP-Fonden, to proceed with claims against seven former Signature executives and directors, as well as former auditor KPMG.
- Shareholders accuse the defendants of misrepresenting the bank's liquidity risks and risk management, which allegedly inflated its share price.
- The FDIC had argued that a 1989 law gave it sole power to pursue securities fraud claims after becoming receiver of a failed bank.
A U.S. appeals court has revived an investor lawsuit seeking compensation for losses stemming from the 2023 collapse of Signature Bank. The 2nd U.S. Circuit Court of Appeals in Manhattan ruled that the Federal Deposit Insurance Corp (FDIC), which seized the lender, does not have sole power to pursue securities fraud claims after taking over a failed bank.
The decision, a victory for shareholders led by Sweden's Sjunde AP-Fonden, allows them to proceed with their case against seven former Signature executives and directors, as well as the bank's former auditor, KPMG. The investors accuse these parties of misrepresenting the bank's liquidity risks and risk management, thereby inflating its share price.
Signature Bank was closed by regulators on March 12, 2023, following significant deposit withdrawals that occurred in the wake of Silicon Valley Bank's failure two days prior. Both banks had substantial exposure to cryptocurrency clients, and the fallout also claimed First Republic Bank in May 2023.
Circuit Judge Richard Wesley stated that while the FDIC has broad powers as a receiver, these do not include "ownership" of the right to sue. He referenced a 2021 Supreme Court decision concerning Fannie Mae and Freddie Mac shareholders. The appeals court has sent the case back to U.S. District Judge Frederic Block in Brooklyn, who had dismissed it in March 2025. The appeals court's decision did not rule on the merits of the lawsuit itself.