Raleigh’s First Citizens Bank sues HSBC for coordinated poaching of former SVB staff
On Monday, Raleigh’s family-owned First Citizens Bank & Trust sued the London financial giant HSBC in a North California district court, alleging that HSBC coordinated a scheme to steal key employees and trade secrets from the failed Silicon Valley Bank (SVB), which First Citizens purchased on March 27.
The lawsuit contends HSBC leaders executed an unlawful multi-week plan dubbed “Project Colony” to raid the “core of [SVB’s] profitability engine.”
First Citizens said the “first wave” of “Project Colony” occurred at around 9 p.m. on Easter Sunday when 42 employees in the former Silicon Valley Bank division resigned by email. The lawsuit states the chief architect of “Project Colony” was David Sabow, a former SVB executive now at HSBC.
“Led to HSBC by Sabow, who had promised them great fortune for their defection, HSBC onboarded all forty-two employees without delay,” the First Citizens lawsuit says.
The Raleigh bank is asking the court for at least $1 billion in damages. It also asked for the case to be settled by a jury.
Through a spokesperson, HSBC declined to comment on the lawsuit.
On March 13, a few days after Silicon Valley Bank collapsed, HSBC acquired the United Kingdom division of SVB. Later that month, First Citizens purchased all deposits and loans of the California-based SVB in a separate deal. First Citizens paid in company stock worth up to half a billion dollars.
The deal doubled First Citizen’s asset balance and made it the 16th largest commercial bank in the United States, according to the Federal Reserve.
HSBC added top SVB executives
Founded in Johnston County in 1898, First Citizens has for most of the past century been led by three generations of the Holding family, with Frank Holding Jr. the current chairman and CEO. The company headquarters are in the North Hills neighborhood of Raleigh.
First Citizens has a history of scooping up failed banks. Even before the SVB deal, it had purchased more than 20 federally assisted banks. But while it had a reputation for buying banks, First Citizen was not known for serving early-stage tech startups, which had been SVB’s core clientele.
On April 11, HSBC USA announced the hiring of four recent Silicon Valley Bank executives, including Sabow, who headed the former bank’s technology and health care services.
Each of the four executives were named as defendants in First Citizens’ lawsuit.
“HSBC and Sabow short-circuited the normally expensive and lengthy process to do things such as conduct market research and develop competent financial projections necessary for launching a commercial banking business,” First Citizens says.
According to the financial database PitchBook, 78 senior bankers have left SVB since it collapsed on March 10. Not all have gone to HSBC.
This story was produced with financial support from a coalition of partners led by Innovate Raleigh as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.
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