As many parties expected, on March 17, 2023 SVB Financial Group (“SVB Financial” or the “Debtor”) the holding company for Silicon Valley Bank, commenced a case under chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the Southern District of New York. Judge Martin Glenn has been assigned to the chapter 11 case. Neither Silicon Valley Bank, currently in FDIC receivership, nor its successor Silicon Valley Bridge Bank, N.A. (“SV Bridge Bank”), were included in the chapter 11 filing.
A lot of ink has been spilled in the last 72 hours regarding the historic developments involving Silicon Valley Bank and Signature Bank. Our quick summary of the facts and law is below. Cadwalader will continue to monitor these developments closely and will update you with additional insights.
From investors to regulators, FTX Trading Ltd (FTX) filing for bankruptcy was unexpected by all. A catalyst for litigation and regulation over the years to come, this collapse will serve as a warning, particularly to cryptocurrency insurers.
What happened?
Executive Summary:
In this chapter of our Annual Insurance Review 2023, we look at the main developments in 2022 and expected issues in 2023 for restructuring and insolvency.
Key developments in 2022
Corporate insolvencies have been rising sharply in 2022 albeit against the backdrop of record low insolvency filings during the pandemic. By June, they had reached their highest quarterly level since 2009 and the depths of the global financial crisis.
In the past six months, four major players in the crypto space have filed for chapter 11 bankruptcy protection: Celsius Network, Voyager Digital, FTX, and BlockFi, and more may be forthcoming. Together, the debtors in these four bankruptcy cases are beholden to hundreds of thousands of creditors. The bulk of the claims in these cases are customer claims related to cryptocurrency held on the debtors’ respective platforms. These customer claimants deposited or “stored” fiat currency and cryptocurrencies on the debtors’ platforms.
On November 29, U.S. Senator Ron Wyden (D-OR), Chairman of the Senate Finance Committee, sent requests for information to the CEOs of six of the largest crypto exchanges. The requests seek information about the safeguards each exchange has put in place to protect customers’ assets in the event they file for bankruptcy or otherwise experience financial distress.