Silicon Valley Bank Financial Group has accused the U.S. Federal Deposit Insurance Corporation of taking inappropriate measures to disconnect it from the cash stored at its former subsidiary, Silicon Valley Bank.
This subsidiary was seized by regulators to prevent a nationwide bank run.
Reuters reported that the company made these allegations in court documents before its first bankruptcy hearing, which took place on Tuesday afternoon in Manhattan.
It had filed for Chapter 11 protection just a week after California banking regulators closed Silicon Valley Bank on March 10. This was the largest bank failure in the United States since the 2008 financial crisis.
According to court filings, the FDIC receiver had “blocked a $250 million wire transfer, removed $19 million from an SVB Financial bank account, and attempted to claw back payments to SVB Financial’s bankruptcy attorneys and financial advisers,” which the company deemed to be “improper actions.”
The company has requested permission from U.S. Bankruptcy Judge Martin Glenn, who is overseeing its Chapter 11 process, to transfer the funds held at Silicon Valley Bank to a different bank.
However, the FDIC argued in court filings on Tuesday that it had placed a hold on all of SVB Financial’s bank accounts as part of its investigation into potential claims against the bank’s former parent.
The filings stated that this action was a legal and necessary part of stabilizing banking operations during the transfer to new management.
It was reported that Shareholders filed a lawsuit against SVB Financial and two of its top executives, alleging that they failed to disclose how increasing interest rates would leave the Silicon Valley Bank unit at risk of a potential bank run.
SVB Financial has not yet responded to a request for comment on this matter.
According to court documents, SVB Financial currently holds $3.4 billion in debt and manages $9.5 billion of other investors’ money through its portfolio of credit and venture capital funds.
The Silicon Valley Bank subsidiary was the company’s largest asset, representing more than $15.5 billion of SVB Financial’s total assets of $19.7 billion.