FDIC Wins Appeals Court Ruling In $1.7B Silicon Valley Bank Fight
By CU Today Staff —
NEW YORK—The FDIC scored another victory in its multibillion-dollar legal battle stemming from Silicon Valley Bank’s collapse, with a federal appeals court ruling the agency did not have to file a proof of claim in SVB Financial Group’s bankruptcy to preserve its right to use claims against the former parent as a defense against demands for payment.
The Second Circuit upheld a bankruptcy court ruling Wednesday, according Law360 report and Bloomberg Law.
The dispute centers on approximately $1.7 billion that SVB Financial had deposited at Silicon Valley Bank before regulators seized the bank in March 2023. SVB Financial filed for Chapter 11 days later and argued the FDIC lost its ability to assert defensive setoffs because it did not file a proof of claim by the bankruptcy deadline. The bankruptcy court rejected that position, finding that filing a proof of claim was not a prerequisite to preserving a defensive right of setoff. The Second Circuit has now affirmed that result.
The ruling comes less than two weeks after the FDIC won a separate but closely related battle over the same $1.71 billion. Reuters reported Aug. 31 that U.S. District Judge Beth Labson Freeman in California rejected the SVB Financial Trust’s attempt to recover the money, finding the trust responsible for decisions by former SVB executives that contributed to the bank’s failure. In that case, the FDIC argued its liability for the $1.71 billion was completely offset by losses caused by the conduct of SVB executives.
Silicon Valley Bank failed in March 2023 after a run on deposits, becoming one of the largest bank failures in U.S. history and prompting the FDIC to invoke measures protecting all depositors.
Originally reported by CU Today.