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Sam Bankman-Fried Seeks to Keep Grasp on $450M in Robinhood Shares
The FTX founder, who says he needs the money to pay his legal fees, is fighting rival claims to the stake by his former company and crypto lender BlockFi.
Updated May 9, 2023, 4:05 a.m. Published Jan 6, 2023, 9:23 a.m.
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Sam Bankman-Fried is arguing that he should retain control of around $450 million in shares of financial trading app Robinhood Markets (HOOD), disputing a rival claim by the estate of the company he founded and once ran, the bankrupt crypto exchange FTX.
The 56 million shares, in principle owned by Bankman-Fried and co-founder Gary Wang through a holding company called Emergent Fidelity Technologies, are the subject of a complex legal battle that also includes bankrupt crypto lender BlockFi and the U.S. Justice Department.
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In a Dec. 22 filing with the U.S. Bankruptcy Court in Delaware, FTX – now under the management of restructuring expert John Ray III – said the shares were only nominally held by Emergent Fidelity and should be frozen until they can be divided up fairly among FTX creditors. Its claim was supported by those liquidating the company in the Bahamas.
Bankman-Fried opposed that idea in a court filing Thursday, arguing that he and Wang had legitimately bought the shares using money borrowed from FTX’s trading arm, Alameda Research, and that the loan was documented. BlockFi, a lender that FTX last year attempted to prop up before it also filed for bankruptcy, also opposed Bankman-Fried's attempt to seize control of the shares in a separate court filing on Thursday.
“It is improper for the FTX debtors to ask the court to simply assume that everything Mr. Bankman-Fried ever touched is presumptively fraudulent,” Bankman-Fried's filing said. “Mr. Bankman-Fried requires some of these funds to pay for his criminal defense.”
Bankman-Fried, who this week pleaded not guilty to federal criminal charges including money laundering and conspiracy to commit wire fraud, resigned as FTX's CEO on Nov. 11, the same day FTX filed for Chapter 11 bankruptcy in Delaware following a CoinDesk report that showed the unusually tight ties between FTX and Alameda.
FTX's new management argued in December that Emergent Fidelity, owned 90% by Bankman-Fried and 10% by Wang, was a shell company, whose interests were “sufficiently identical” to those of the wider company. Ray has previously complained of defective record-keeping at FTX, and in particular of transfers being made to staff without proper documentation.
In any case, the filings concede, the debate may prove academic, after a representative of the U.S. Department of Justice told the court Wednesday that the government was seizing the shares as part of its proceedings against Bankman-Fried.
Read more: US DoJ Is Seizing Banking Assets, Robinhood Shares Linked to FTX, Court Told
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