By Dietrich Knuth
NEW YORK (Reuters) – SVB Financial Group, the former owner of failed Silicon Valley Bank, received permission from a U.S. judge on Friday to hand over its assets to creditors and end its bankruptcy.
Its bankruptcy restructuring allowed it to create a fund to continue litigation against the U.S. Federal Deposit Insurance Corporation, which seized $1.9 billion from SVB Financial’s bank accounts during the 2023 collapse of Silicon Valley Bank — one of the largest banking collapses in U.S. history.
The battle over the seized funds will take place in federal court in California.
SVB Financial says the money should be returned because the FDIC invoked the “systemic risk” exemption to protect all deposits at Silicon Valley Bank, including accounts over $250,000 that the FDIC normally protects.
The FDIC responded that it did not intend to protect the parent company’s bank accounts, saying the funds were legally held to offset the costs of bailing out the bank.
Depending on the outcome of the lawsuit, SVB Financial’s senior bondholders, who are owed $3.3 billion, will be paid between 41% and 96% of their dues.
Bondholders include MFN Partners, Pacific Investment Management Company, Bank of America Securities, JP Morgan Securities and King Street Capital, according to court documents.
As part of its bankruptcy restructuring, SVB Financial also sold off some assets, and spun off its venture capital business and investment banking unit.