Silicon Valley Bank customers who had their collective $38 million in Cayman Islands deposits wiped to ZERO win court ruling that could help them get their money back
- Silicon Valley Bank collapsed in March – the second largest bank failure in US history
- The regulator guaranteed the bank’s deposits held inside the US, but not those outside the country
- Customers in the Cayman Islands checked their deposits to find they had been wiped to zero
Silicon Valley Bank customers who had their collective $38 million in Cayman Islands deposits wiped down to zero have won a court ruling which could help them retrieve their lost funds.
A Cayman Islands court approved a petition filed on June 13 to liquidate the assets of the local branch of the bank, according to the Wall Street Journal, which argued it was unable to pay the debt.
The deposits were seized by the Federal Deposit Insurance Corporation (FDIC) when the bank collapsed in March.
The regulator guaranteed the bank’s deposits held inside the US, but not those outside the country.
This meant that Silicon Valley Bank customers checked their Cayman deposits and saw their cash had disappeared.
The regulator guaranteed Silicon Valley Bank’s deposits held inside the US, but not those outside the country
Silicon Valley Bank collapsed in March – the second largest bank failure in US history
After the collapse of Silicon Valley Bank – the second largest bank failure in US history after the 2008 failure of Washington Mutual – North Carolina-based bank First Citizens bought out the bank.
This means customers in the Cayman Islands are still expected to pay back the loans they had taken from Silicon Valley Bank.
But the customers say the money they had earmarked to repay the debts is in the Cayman bank accounts, according to the Wall Street Journal.
The Cayman Islands does not have an equivalent to US federal deposit insurance – which officially covers up to $250,000 per bank account.
The depositors, many of which were venture-capital funds in Hong Kong and mainland China, reportedly think the ruling will increase their chances of getting their money back from the FDIC.
According to people familiar with the matter, the Cayman Islands court also reportedly approved the appointment of two liquidators, who will begin investigating ways to challenge the FDIC’s classification of the Cayman depositors as unsecured creditors.
‘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 Paul Kennedy, a partner at law firm Campbells, who filed the petition.
The Cayman Islands (pictured) does not have an equivalent to US federal deposit insurance
Charts released by SVB show sharp declines in overall VC investments (top) and the outflow of SVB client funds (bottom) over the past year as interest rates rose
Silicon Valley Bank CEO Greg Becker speaks at a conference in 2018. The bank’s collapse was the second largest bank failure in US history
The bank also had international branches in Germany and Canada that made loans but did not take deposits, as well as a subsidiary in the UK which was taken over by HSBC.
The bank, based in Santa Clara, California, failed on March 10 after depositors rushed to withdraw money amid fears about the bank’s health.
The implosion of Silicon Valley Bank rippled across global markets, as investors debated whether the bank’s collapse was due to its unique position catering to the troubled tech sector or might be a signal of broader risks in the banking sector.