The collapse of Silicon Valley Bank may have temporarily threatened portfolio businesses, returns, and some of their own capital at Andreessen Horowitz or Sequoia Capital. But it meant an upheaval for SVB Capital, the 110-person $9.5 billion venture arm once closely intertwined with the commercial bank.

Primarily based out of an office in the heart of Silicon Valley, nearby the Rosewood Hotel in Menlo Park, SVB Capital has been hosting weekly update calls for its employees each Friday, according to someone close to the firm, and it’s been sending out updates to reassure its limited partners that everything is business as usual. The firm is currently on the market—and it will need to retain its people, and the confidence of its investors, if it hopes to make the most out of a sale. 

All the while, hundreds of bankruptcy documents reviewed by Term Sheet, as well as interviews with limited partners and someone close to the firm, reveal a venture capital firm in the middle of a rather unusual predicament.

When the FDIC took control of Silicon Valley Bank on March 10, SVB Capital was abruptly split from the financial institution responsible for managing the payroll of its 110 employees. Silicon Valley Bank, not its parent company or other legal entities, oversaw the payment of salaries, bonuses, and benefits packages for SVB Capital’s investors and staff. The commercial bank held a substantial portion of the books and records for the venture capital firm’s parent company, SVB Financial Group—not to mention it provided a slew of bank employees to handle everything from legal to accounting functions. To make matters even more complicated, the receivership triggered default clauses in the debt documents for SVB Financial Group—which contributed to the parent company’s very high-profile Chapter 11 bankruptcy in mid-March. (A SVB Capital representative declined to comment for this story.)

To pick apart what was still valuable, the board of SVB Financial Group, the former parent company of the commercial bank, placed William Kosturos of Alvarez & Marsal in charge of restructuring the operation. While First Citizens Bank purchased the commercial banking branches and many of the assets, the bankruptcy still includes the venture arm (though not its funds or portfolio investments). Shortly after the bankruptcy proceedings began in mid-March, Kosturos had filed a handful of motions in court, laying out SVB Capital’s precarious position post-split.

“The Debtor is currently unable to access a substantial portion of its books, records, files, electronic systems and key employees,” Kosturos wrote in one of the motions, noting that, not only were 110 of SVB Capital’s employees technically on payroll at the commercial bank, but additional bank employees had been providing the legal, governance, accounting, finance, administrative and other operational functions “that are critical to the Debtor’s ability to continue its operations,” Kosturos wrote.

SVB Financial Group has asked the bankruptcy court for the authority to contract new providers for HR and payroll functions and benefits, and to transfer employment of SVB Capital staffers away from Silicon Valley Bank. (A First Citizens Bank spokesperson declined to comment)

All the while, the FDIC has blocked wire transfers and attempted to claw back payments SVB Financial Group has made to Kosturos’ firm, Alvarez & Marsal, as well as its legal firm, Sullivan & Cromwell. The FDIC has also resisted the parent company’s efforts to move funds to new bank accounts, according to documents.

Court filings make it clear that there is a serious risk to the business if these matters aren’t addressed—and quickly: SVB Capital’s 110 employees might leave. 

Meanwhile at SVB Securities… New bankruptcy filings from last week revealed that UBS has had two ongoing arbitration claims against 15 of its former investment bankers who hopped ship for SVB Securities in 2021, including Jason Auerbach, who had only recently been SVB Securities’ co-head of investment banking. Since SVB’s collapse, Auerbach has reportedly taken a new gig at Moelis, according to Bloomberg. (UBS and Auerbach did not respond to requests for comment on the matter. SVB Securities declined to comment.)

Are you an employee or limited partner of SVB Capital or a banker at SVB Securities? Have more information? Reach out to Jessica Mathews via phone or Signal at +1 479-715-9553

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com
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Jackson Fordyce curated the deals section of today’s newsletter.

VENTURE DEALS

- Macro Oceans, a Sacramento and San Francisco-based California biotechnology company that turns seaweed into low-carbon chemicals, raised $5 million in seed funding co-led by Refactor Capital, Lowercarbon Capital, and McKinley Capital.

PRIVATE EQUITY

- Area 15 Ventures acquired Port of Subs, a Reno, Nev.-based sandwich brand. Financial terms were not disclosed.

IPOS 

- Fung Group, a Hong Kong-based consumer goods company, is considering an initial public offering in Singapore for its retail brands unit. The offering could value the company at about $500 million, according to Bloomberg.

- Hoppecke, a Brilon, Germany-based energy storage units and power supplies manufacturer, is considering an initial public offering of its specialist lithium-ion unit, according to Bloomberg.

FUNDS + FUNDS OF FUNDS

- Canaan, a Menlo Park, Calif.-based venture capital firm, raised $850 million across two funds focused on early-stage investments in tech and health care.