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Judge blocks $1.71 billion claim against FDIC tied to Silicon Valley Bank
The ruling faulted the failed bank's holding structure for pursuing risky long-term government bonds and mortgage-backed securities, in a collapse linked to at least $4.52 billion in investment losses.
A U.S. judge ruled the former parent of Silicon Valley Bank cannot pursue a $1.71 billion claim against the FDIC, according to Reuters. The decision, issued by U.S. District Judge Beth Labson Freeman, blocks a trust that took over the parent’s claims from continuing the case tied to the March 2023 collapse.
Freeman’s 206-page ruling said the trust was responsible for decisions by former executives that sought higher profit by investing heavily in long-term government bonds and mortgage-backed securities. The judge pointed to rising interest rates that produced at least $4.52 billion in losses in the bank’s investment portfolio, triggering a bank run that disrupted many technology startups reliant on its deposits.
Reuters reports that most of Silicon Valley Bank’s deposits were uninsured, and its failure preceded the 2023 collapses of Signature Bank and First Republic Bank. Silicon Valley Bank’s holding company has been succeeded by SVB Financial Trust.
The judge said the bank’s chief financial officer, treasurer, and others acted negligently by taking excessive interest rate and liquidity risks, with encouragement from the board. Reuters added that the FDIC is also suing 17 former executives and directors, including former CEO Gregory Becker, to recover billions of dollars for alleged gross negligence and breaches of fiduciary duty.