SVB Financial Sues to Recover $1.9 Billion From FDIC

The parent company of Silicon Valley Bank claims that the American banking supervisory authority owes it $1.9 billion.

SVB Financial Sues to Recover $1.9 Billion From FDIC

To get the money, the company filed a lawsuit against Federal Deposit Insurance Corporation (FDIC). SVB Financial went to court last Sunday, July 9. The lawsuit contains a claim for the recovery of funds held by the watchdog since gaining control over the financial institution in the first half of this year.

SVB Financial applied for bankruptcy protection in March 2023. This happened a few days after the FDIC arrested the Silicon Valley Bank. The lender has ceased operations due to a shortage of deposits. Currently, SVB Financial claims that the practice of withholding funds, in which the supervisory authority is involved, is a violation of the US Bankruptcy Code.

In its lawsuit, the company claims that the continued retention of money has a significant financial impact on the debtor. The funds in the accounts, the total amount of which is $1.93 billion, are the main asset of real estate. The company claims that the debtor’s lack of access to this money makes reorganization impossible and causes damage on an ongoing basis.

SVB Financial also states that the receipt of funds is the most important factor in the development and subsequent implementation of a plan to maximize the value of the debtor’s tax assets. Separately, the company notes that the money in the accounts can bring more than $100 million in annual interest.

The FDIC has not yet provided any comment on the lawsuit.

The news about SVB Financial’s efforts to recover funds appeared a few days after a bankruptcy judge granted permission to implement a deal to sell the investment bank SVB Financial Group SVB Securities to its managers for $100 million. Initially, the judge did not approve of this commercial intention. He said that the implementation of the deal would allow too many representatives of the management of the Silicon Valley Bank to avoid possible proceedings over the collapse of the financial institution. After some time, the judge changed his position on this issue. The deal was approved after company officials added new restrictions to legal releases.

The Silicon Valley Bank collapsed on March 10. This event was the starting point in the crisis of the American banking sector. A wave of bankruptcies affected regional creditors. Since then, First Citizens Bancshares has been sold, but the consequences of its collapse are still the subject of litigation in court.

A court in the Cayman Islands liquidated the local branch of SVB in June. As a result of this decision, local depositors received more opportunities to return their funds. Among these investors are venture capital funds from Hong Kong and China. Many of them are not covered by the deposit guarantee program, which is similar to the FDIC program. For this reason, depositors were left with nothing after the bankruptcy of a financial institution. This prompted them to seek legal assistance.

In June, it became known that federal officials were investigating the involvement of the banking giant Goldman Sachs in the activities of the Silicon Valley Bank in the last days of its existence. As part of this investigation, the Federal Reserve System and the Securities and Exchange Commission (SEC) are investigating the role of one of the largest representatives of the American banking system in the purchase of a portfolio of securities of a bankrupt lender.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.