SVB Financial Group Sues FDIC

SVB Financial Group, once the parent company of Silicon Valley Bank is suing the Federal Deposit Insurance Corp. to recover around $1.9 billion in cash the regulator seized after taking over the failed bank in March, according to a complaint filed Sunday.

Overall, the suit claims a lack of access to funds which obstructed SVB Financial from reorganizing after it’s departure. An article of how the bank failed can be found here. Their argument is that “the core estate asset” would generate more than $100 Mn in annual interest at current rates. If the account funds are not paid immediately, the plaintiff may need to retort to costly debtor-in-possession financing.

The company alleges the FDIC’s retention of money violated the U.S. bankruptcy law.

The claim states that “Despite acting to make “all” depositors whole, despite announcing publicly it was doing so and assuring “full access” to depositors on an immediate basis and later confirming that undertaking in filings in this Court, and despite inducing reliance on that legal commitment by large depositors, including the Debtor, who chose not to move their remaining deposit funds out of the Bridge Bank, the FDIC has refused to pay the Debtor its Account Funds.”

Neither the FDIC or the FDIC acting as receiver for Silicon Valley Bank, suggests that the money doesn’t belong to the debtor.

The filing comes days after a bankruptcy judge signed off on the sale of SVB’s investment-banking division to a management group that includes SVB Financial Group’s founder, Jeff Leerink.

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