A federal judge ruled that the Federal Deposit Insurance Corporation (FDIC) is not required to return $1.71 billion to creditors of SVB Financial Group, the bankrupt parent company of Silicon Valley Bank. Judge Beth Labson Freeman of the U.S. District Court in San Jose, Calif., issued the ruling Friday, dealing a significant blow to distressed-debt investors who had bet on recovering those funds. The judge determined that a liquidation trust for SVB Financial Group cannot recover the cash because the parent company's officers' "imprudent actions" caused Silicon Valley Bank to suffer at least $5.4 billion in financial damages.

This loss effectively offsets any potential liability by the FDIC. The decision wipes out the investor claim against the regulator, solidifying the FDIC's position in the aftermath of the bank's high-profile collapse.