First Citizens Bank sued HSBC on Monday, claiming the British lender poached more than 40 bankers from the failed Silicon Valley Bank so it could gain access to SVB's confidential, proprietary and trade secret information about tech and healthcare clients.
First Citizens, in the lawsuit, identified David Sabow, SVB’s former head of tech and healthcare banking in North America, as the “chief architect” of a scheme — code-named Project Colony — meant to bring the “core of SVB’s profitability engine” with him to HSBC, according to Bloomberg.
Sabow, unbeknownst to First Citizens, joined HSBC within days of the British bank’s March 13 acquisition of SVB’s U.K. unit, according to Monday’s complaint. Sabow then helped HSBC identify six key U.S. leaders — also listed in the lawsuit as defendants, according to Reuters — as hiring targets. The six could, in turn, persuade 35 more bankers to follow, First Citizens said. Sabow offered defectors “great fortune,” the Financial Times reported.
Using data from SVB, Sabow estimated that a unit composed of the bankers he intended to poach could hand HSBC $66 million in profits over its first year, according to the lawsuit. That figure could jump to nearly $1.3 billion by the fifth year, the complaint asserted.
First Citizens, which bought most of SVB’s assets in a deal announced March 27, is seeking more than $1 billion in damages in the lawsuit.
“HSBC and Sabow short-circuited the normally expensive and lengthy process” of conducting market research and developing competent financial projections “necessary for launching a commercial banking business," First Citizens said in the suit, according to Reuters.
In all, 42 employees submitted their resignations, effective immediately, within a half-hour of one another on April 9, First Citizens said in the lawsuit, acceding to the Financial Times.
First Citizens had wanted to retain SVB’s close ties to the West Coast’s tech and startup community, it said, and also identified the six leaders as crucial to a transition team that would help the Raleigh, North Carolina-based bank integrate SVB assets.
“If stable banks are to be [incentivized] to rescue failed banks to restore financial stability, opportunistic competitors and insiders cannot take and replicate the bank’s assets — its highly sensitive confidential, proprietary and trade secret information — before the resolution can be implemented,” First Citizens asserted, according to the Financial Times.
HSBC declined to comment to Reuters, Bloomberg and the Financial Times.
In its complaint, First Citizens called the coordinated resignation of dozens of bankers a breach of fiduciary duty and the duties of loyalty.
“Defendants’ theft and misuse of confidential, proprietary and trade secret information, disruption of First Citizens’ business operations, unfair competition and unlawful conduct are reprehensible and demand a substantial award of compensatory and punitive damages,” the bank said, according to the Financial Times.
Such a mass migration of talent, if not penalized, could undermine financial stability, First Citizens asserted in its complaint.
HSBC is hardly the only bank to mine talent from SVB in the wake of the latter’s collapse. MUFG hired SVB’s former head of corporate banking and four other ex-SVB senior executives to bolster its technology, media and telecommunications unit.
Florida-based BankUnited, which lost out in the bidding process for SVB, hired three bankers from another failed bank, First Republic, in an effort to build out its corporate-banking presence.