CFO Liability in the Modern Era: Real Cases, Rising Risk
- Steven Barge-Siever, Esq.
- Jul 9
- 6 min read
From MF Global to Silicon Valley Bank, today's CFOs are facing personal exposure like never before - often without the infrastructure to protect them.
By Steven Barge-Siever, Esq.
Upward Risk Management
It was about 10 years ago - I was standing in my office, drinking coffee, wearing a new suit, and watching the sun come up over Central Park. My clients were large PE funds, and many of them were probably enjoying a similar view that day from slightly higher floors in surrounding buildings.
On that particular morning, a sales guy rushed in and asked me to jump on a call with a CFO - our sales team was always looking for a new wave to surf, and I was there to create insurance solutions.
This meeting was unique. The CFO had stepped into a new role after surviving one of the most publicized corporate failures of the decade: the collapse of MF Global.
Nearly $1.6 billion in customer funds had gone missing, and the firm’s leadership was hauled before Congress (House Financial Oversight Committee) in a high-profile reckoning.
One of those people was my new client/CFO. We met for lunch at Michaels in Midtown, and he shared his story of MF Global - it was was fascinating. He was hired into the role just six months before the collapse. He wasn’t the cause of the collapse. But when the firm imploded he became the face of the fallout.
And the safety nets - company indemnification, the business judgement rule and corporate insurance were all tested. Most failed.
That story stuck with me, and it’s not about one firm - it’s about how many CFOs treat insurance like a standard purchase, and not a defense strategy.
This client did not.
A Familiar CFO Risk Pattern - From MF Global to Modern Tech Liability
MF Global’s collapse wasn’t just a story of bad bets - it was a case study in unchecked risk, CFO liability and the illusion of control.
MF Global placed over $6 billion in leveraged bets on European sovereign debt, using internal repo arrangements and collateralized loans. These were highly complex, high-stakes positions - made worse by the fact that no one was really sure who knew about them. Regulators, shareholders, even customers were in the dark.
When the market turned, the firm couldn’t meet collateral demands. Stock prices crashed. Creditors tightened terms. Customers rushed to withdraw their funds - but it was already too late. In the final days, billions in customer money went missing, and MF Global filed for bankruptcy.
It was later revealed that the firm had likely used customer funds to keep operations afloat - a violation of the Commodity Exchange Act and a devastating ethical breach.
But here’s the human part many people forget:
The CFO had been in the role just six months. He hadn’t built the system. But he was the one left defending it. And the liability insurance? Unprepared for the scale of what unfolded.
The Parallel to Today’s Tech Companies
Fast-forward to today, and you’ll find a disturbingly familiar structure in the tech world.
Many high-growth tech companies are fueled by massive capital raises, often at unsustainable burn rates. Their survival depends on another round, or an acquisition. Profitability isn’t the plan - momentum is.
There is often solace that everyone knows it: Investors. Founders. CFOs. They see the financial structure and still sign on - without really asking what happens if there is a downturn.
What happens if the company misses its numbers? If we don't raise the next round? If an investor sues?
This is where the CFO, a highly skilled financial professional, is often asked to step outside their expertise and to take on insurance. But they are not a risk manager, and they don't have an insurance department to fall back on like the Fortune 500 clients I've represented.
Generally, the CFO at a VC \ PE fund, or tech company is told to “handle insurance.” They tell the broker to “get it done.”
That’s not managing risk - that’s outsourcing corporate liability to a salesperson.
And in that vacuum, the CFO becomes the default risk manager - whether they want to be or not.
The Data: CFO Litigation Is Rising - Fast
The CFO Legal Tracker 2024, compiled by Datarails and litigation experts, tells a sobering story:
233% year-over-year increase in fiduciary duty lawsuits against CFOs
50% rise in fraud-related claims
Suits naming CFOs at companies like GoDaddy, Columbia Pipeline, and Silicon Valley Bank
These aren’t fringe events. They’re happening in courtrooms right now. And while the headlines name billion-dollar companies, the structural risks apply just as much (if not more) to private, venture-backed companies.
Why Finance Leaders Are Personally Exposed
Fiduciary duty is now the number one legal threat facing finance leaders. It’s deceptively easy to trigger - no fraud or personal gain is required. The question is:
Did the CFO act in good faith and with reasonable diligence?
This was the question asked by congress after MF Global's collapse, and the same question is asked in courts today.
If not, they can be held personally liable. Not just sued, but sued without guaranteed indemnification, without a working D&O policy, and without a board to defend them.
And that’s exactly what’s happening:
In the GoDaddy case, the CFO was accused of approving an $850M settlement for tax receivable agreements allegedly worth only $175M.
In the Columbia Pipeline merger litigation, the CFO was named in allegations of rushing an undervalued sale for personal change-in-control benefits.
In the Silicon Valley Bank fallout, the CFO was sued for allegedly concealing interest rate risk.
These aren't edge cases. They're examples of what happens when strategic financial decisions intersect with scrutiny, and no risk infrastructure exists to absorb the impact.
The Trap for Tech Companies: No Infrastructure, No Protection
1. Indemnification Promises Don’t Work Without Cash
Tech companies (should) offer indemnity in bylaws (and must for DE corporations) - but when capital dries up, those promises are meaningless. No Series D funding? No money for defense costs.
2. D&O Coverage Is Misaligned and/or Strategically Riddled with Exclusions
Many tech company D&O policies we encounter were written to close a round, not protect the professionals.
I had this exact conversation with a Series A fintech two weeks ago - they loved the analytics we put together using Undr.ai, but they just weren't interested in coverage except close vendor deals and grow ARR. They want to grow ARR to get more funding. More funding requires financial projections and disclosures.
3. CFOs Are the Last Person With a Signature on It
Take a step back and think about the person in charge of raising capital and verifying sales figures. It is the CFO.
And if there is a problem, the CFO - who signed off on projections, contracts, and disclosures - is often the only person left to blame.
Why This Problem is Magnified for Later Stage Tech
Startup finance leaders operate in conditions that create liability by default:
Decisions are made fast and rarely documented
Legal review is informal or absent
Job scope creeps without coverage following
Pressure from boards and investors can distort disclosure practices
According to legal experts cited in the CFO Legal Tracker:
“When investors or third parties feel jilted by a perceived error... they tend to look to the CFO to hold them personally liable.”
And here's the kicker: you don’t need to be wrong - you just need to be the one with authority when something went wrong.
Best Practices of Big Companies the You Don't Have
Fortune 500 | Venture-Backed Startups |
Risk departments | No internal risk management |
In-house legal team | One attorney, Fractional or none |
Insurance buying committees | One busy finance lead |
Brokers managed by strategy | Brokers left to “do what we did last year” |
Capital to fund indemnity | Insolvency the minute things go south |
That’s the fundamental problem.Startups face equal or greater complexity - but with none of the infrastructure to manage risk.
The Solution: Fractional Risk Management
You can hire a sales person or you can look for a risk manager. My goal with URM was to act like the in-house risk manager you don’t have - so your CFO isn’t alone.
What We Do:
Audit your D&O and other policies for exclusions, gaps, and missing names
Review financial documents, contracts, and governance through a legal-risk lens
Document board and officer protections in ways that can survive scrutiny
Train CFOs and legal teams on how to build defensible records
Negotiate smarter policies with the carriers that matter—because we’ve been on both sides
We don’t push product. We protect people.
Final Thought
The CFO Legal Tracker 2024 is a warning. CFOs and VPs of Finance are being sued at record levels - and the vast majority of those claims arise from routine decisions, not misconduct.
If your insurance program hasn’t been updated since your last funding round - or if your broker can’t explain what happens if the company goes under - you’re not protected.
And when the board stops backing you, you’ll wish someone had raised the red flag sooner.
We just did.
If you are a later stage company, PE or VC CFO, wouldn't you rather work with an attorney than a sales person?
