A U.S. bankruptcy judge has ruled in favor of SVB Financial, the bankrupt former parent of failed Silicon Valley Bank, ordering the Federal Deposit Insurance Corporation (FDIC) to return $10 million in seized tax refund checks. The ruling prevents the FDIC from claiming future tax refunds valued at $300 million. Judge Martin Glenn in Manhattan ruled that the FDIC had no authority to intercept checks that were clearly written out to SVB Financial. He ordered the FDIC to return the intercepted checks by Friday and to send any future tax refunds to SVB Financial.
The FDIC took over Silicon Valley Bank on March 10 after a bank run that also brought down Signature Bank (OTC:SBNY) 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.
The FDIC argued that the tax refunds may be owed to the seized bank, but Glenn ruled that the tax agreement gave SVB Financial the responsibility to calculate and allocate any refunds owed to the bank. This ruling prevents the FDIC from unilaterally claiming any portion of the refunds.