Silicon Valley Bank’s parent company says America’s banking watchdog owes it $1.9 billion.
To that end, SVB Financial filed suit Sunday (July 9) against the Federal Deposit Insurance Corporation (FDIC) to recover the funds, which the regulator has held since seizing Silicon Valley Bank earlier this year.
SVB Financial sought bankruptcy protection in March, days after the FDIC seized Silicon Valley Bank, which folded following a run on deposits. Now, SVB Financial is claiming that the FDIC is violating U.S. bankruptcy code by holding onto its funds.
“These continuing violations are having a significant impact on the Debtor,” the company wrote in its suit. “The $1.93 billion in Account Funds is the core estate asset. The Debtor’s lack of access to these Account Funds is impeding its ability to reorganize, and causing harm to the Debtor on a continuous basis.”
SVB Financial argues that “immediate receipt” of the funds is crucial to its ability to come up with a plan that “maximizes the value of the Debtor’s tax attributes,” and adds that the funds should be generating more than $100 million in yearly interest.
The news comes days after a bankruptcy judge approved the sale of SVB Financial Group’s investment bank SVB Securities to its managers.
A report last week by Bloomberg News noted that the bankruptcy judge had initially refused to OK the sale, saying it would free too many executives from possible lawsuits around Silicon Valley Bank’s collapse, but later approved the sale after company officials included new restrictions to the legal releases.
Silicon Valley Bank collapsed March 10, kicking off a larger crisis involving regional lenders. While the bank has since been sold to First Citizens Bancshares, the impacts from its failure continue to play out in court.
For example, a court in the Cayman Islands last month dissolved the local branch of SVB, giving depositors there a better chance of recovering their funds.
These depositors — many of whom are venture capital (VC) funds in Hong Kong and China — were not covered by a deposit guarantee program like that provided by the FDIC, and were left with nothing when the bank failed, so they sought legal redress.