By Jonathan Stempel
(Reuters) – The former parents of Silicon Valley Bank can file a lawsuit to recover $19.3 billion in deposits the bank seized after the bank collapsed in March 2023, a federal judge ruled.
In a decision Thursday, U.S. District Judge Beth Labson Freeman said in San Jose, California, that the former parent, now known as the SVB Financial Trust, fully claimed that the FDIC's corporate ability to maintain control of deposits, even though the charges “disappeared.”
The agency argues that the deposits are controlled by the FDIC and whose capabilities are the recipients of Silicon Valley banks, another legal entity that former parents are also suing.
Freeman also said the former parent could try to prove that he was properly relying on the FDIC guarantee that the deposit would remain safe, allowing it to lure him alone. She dismissed the due process claim.
The FDIC and former parents' attorneys did not immediately respond to a request for comment on Friday.
Silicon Valley banks collapsed after rising interest rates, and their long-term portfolio of government bonds and mortgage-backed securities caused huge losses.
Its problems triggered the bank's operations, partly because of no insurance and undermining many of its technology startups holding deposits.
The bank was in one of the biggest collapses in U.S. banking history, which had about $20.9 billion in assets before its losses.
Most of its business has been transferred to Bancshares, the first citizen of North Carolina lenders.
The FDIC sued 17 former Silicon Valley bank executives and directors, including one-time CEO Gregory Becker, for six weeks to reclaim billions of dollars for suspected serious negligence and breach of fiduciary obligations.
“SVB represents a case of serious mismanagement of interest rate and liquidity risks,” the FDIC said last month.
The case is SVB Financial Trust v. FDIC, U.S. District Court, Northern District, California, No. 23-06543.
(Reported by Jonathan Stempel, New York; Edited by Bill Berkrot)
