SVB Financial fights FDIC over seized tax refunds
NEW YORK – SVB Financial, the bankrupt former parent of failed Silicon Valley Bank, said on Thursday the U.S. Federal Deposit Insurance Corporation must release $10 million in tax refund checks owed to the company, escalating a dispute over the agency’s efforts to seize assets in the wake of the bank’s collapse.
The FDIC had previously asked the bankruptcy court judge overseeing the case to create an escrow account to hold all of the tax refunds while the regulator determines whether they properly belong to the seized bank or SVB Financial.
SVB Financial said in a Thursday court filing in Manhattan that the FDIC acted before waiting for a court order, intercepting five checks totaling $10 million and laying claim to $219 million in tax refunds expected to come from federal, state and local governments.
SVB Financial urged the court to stop the FDIC from interfering with its property rights, saying its “ham-fisted authoritarianism should not be allowed to continue.”
The FDIC declined to comment.
The FDIC took over Silicon Valley Bank on March 10 after depositors rushed to pull out their money in a bank run that also brought down Signature Bank and wiped out more than half the market value of several other U.S. regional lenders.
During the takeover, the FDIC also seized about $2 billion from SVB Financial’s own accounts at the bank, a move that has slowed SVB Financial’s progress in a bankruptcy proceeding to sell remaining assets like its venture capital investments.
SVB Financial said it may be forced to take out a bankruptcy loan “at great expense” because it lacks sufficient cash for an orderly sale of its assets.
The FDIC has said it is legally able to hold the seized funds while it determines how much SVB Financial should contribute to the bank takeover costs. The FDIC on Thursday estimated that the bank failure caused a $16 billion hit to its insurance fund.
SVB Financial argued that the FDIC cannot be allowed to seize assets without laying out exactly what it believes SVB Financial owes and why.