SVB Financial Group will be able to sell its investment banking division once it can ensure that it won’t release liabilities related to the collapse of Silicon Valley Bank, a Manhattan bankruptcy judge ruled Thursday.
Judge Martin Glenn said he was unable to approve the sale of SVB Securities to a group led by its former CEO Jeff Leerink because he was unsure if executives including Leerink had any actual liability, Reuters reported.
The deal, as presented to the court, had a provision that would have released Leerink and other executives from liability associated with the collapse of SVB — an event that triggered multiple other bank collapses, and a broad loss of faith in the banking system.
"You're releasing them from everything," Glenn told SVB Financial's attorneys, according to Reuters. "I can't believe you'd even try to sneak this by me."
Glenn said he would likely approve the sale once the deal is reviewed, after SVB Financial attorney James Bromley told him the liability releases would be removed by Friday.
In a Thursday court hearing in the Cayman Islands also related to SVB’s collapse, the court approved a petition by former SVB customers to wind up the local SVB branch, which some customers believe could help them get their money back, The Wall Street Journal reported.
The petition, filed June 13, was on behalf of former customers who’d lost $38 million in deposits in the bank’s collapse.
When the Federal Deposit Insurance Corp. seized the funds in March, it guaranteed U.S.-held SVB deposits, but not deposits held internationally; and in the Cayman Islands, there is no federal deposit insurance equivalent.
Many of the SVB customers whose funds were parked in the Cayman Islands are based in mainland China and Hong Kong, The Wall Street Journal reported.
The court also approved the appointment of liquidators who plan to challenge the FDIC in its classification of Cayman depositors as unsecured, sources told the publication.
“We see this as a very positive outcome for the Cayman depositors who up to now were not represented by an officeholder that could take steps on their behalf,” said Campbells Law partner Paul Kennedy, who filed the petition on behalf of the creditors.