NEW YORK (Reuters) - SVB Financial Group ( SIVBQ ), the former owner of failed Silicon Valley Bank, received a U.S. judge's permission on Friday to turn over its assets to creditors and end its bankruptcy.

Its bankruptcy restructuring has made provision for the creation of a trust to pursue litigation against the U.S. Federal Deposit Insurance Corporation which seized $1.9 billion from SVB Financial's ( SIVBQ ) bank accounts during Silicon Valley Bank's 2023 collapse - one of the largest in U.S. banking history.

The battle over the seized funds will play out in a California federal court.

SVB Financial ( SIVBQ ) has argued the cash should be returned because the FDIC had invoked a "systemic risk" exemption to protect all deposits at Silicon Valley Bank, including accounts with more than the $250,000 that the FDIC typically protects.

The FDIC has countered that it did not intend to protect the bank accounts of the parent company, saying the money was legally seized to offset its costs in rescuing the bank.

Depending on the outcome of the litigation, SVB Financial's ( SIVBQ ) senior bondholders who are owed $3.3 billion, will be paid between 41% and 96% of what they are owed.

The bondholders include MFN Partners, Pacific Investment Management Company, Bank of America Securities, JP Morgan Securities, and King Street Capital, according to court documents.

As part of its bankruptcy restructuring, SVB Financial ( SIVBQ ) has also sold assets, spinning off its venture capital business and investment banking unit.