SVB Financial objects to FDIC’s attempt to hold tax refunds in escrow

By Sarah Lizee

Olympia, Wash., May 12 – SVB Financial Group filed an objection to a motion from the Federal Deposit Insurance Corp. as receiver for Silicon Valley Bank for an order to establish a tax refund escrow account, according to documents filed Thursday with the U.S. Bankruptcy Court for the Southern District of New York.

As background, on March 10, SVB’s former subsidiary, Silicon Valley Bank, was closed on the order of the California Department of Financial Protection and Innovation (DFPI), and on the same day DFPI asked the FDIC to step in to serve as receiver of Silicon Valley Bank.

Through the motion, the FDIC is seeking the establishment of an escrow arrangement relating to tax refund checks, which were intercepted by the FDIC in violation of the automatic stay and potentially applicable criminal law, as well as all future tax refunds to which the debtor has rights, SVB said.

SVB said it understands that at least five checks have been mailed to the debtor’s former business address and are being wrongfully withheld by or at the direction of the FDIC. The checks total nearly $11 million.

Through the motion, the FDIC wants to have the five tax refund checks already received, and any additional tax refunds to which the debtor may be entitled in the future, placed into an escrow account under the bankruptcy court’s supervision.

“This request is the latest in a series of improper steps FDIC-R has taken to wrongfully withhold property of the estate, disrupt the ongoing operations of the debtor’s businesses, and require the debtor to seek funding at great expense while it withholds the debtor’s assets,” SVB said in its objection.

“The FDIC-R’s ham-fisted authoritarianism should not be allowed to continue.”

The financial services and bank holding company is based in Santa Clara, Calif. The company filed bankruptcy on March 17 under Chapter 11 case number 23-10367.

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