FTX Urges Bankruptcy Court to Freeze $450M in Robinhood Shares Owed to Creditors
Liam J. Kelly
Fri, December 23, 2022 a
FTX, now in the hands of its new CEO John J. Ray III, is urging the bankruptcy court overseeing the exchange's unwinding to freeze roughly $450 million in Robinhood shares.
In a court filing, FTX argued that because there are so many creditors seeking ownership over these shares, "the asset should be frozen until this Court can resolve the issues in a manner that is fair to all creditors of the Debtors."
The 56 million shares in Robinhood Class A common stock are currently held in a brokerage account in New York City called ED&F Man Capital Markets Inc. Sam Bankman-Fried purchased these shares in May this year via a special-purpose holding company organized in Antigua and Barbuda called Emergent Fidelity Technologies.
FTX Eyeing Purchase of Robinhood: Report
The founder of FTX and its former CEO is one of the creditors hoping to get hold of the stockpile to pay for his extensive legal fees. BlockFi, the now-bankrupt crypto lender that was initially promised these shares, is another creditor, as is Yonathan Ben Shimon, who petitioned an Antigua-based court to appoint him the Robinhood shares.
BlockFi filed a lawsuit against Bankman-Fried shortly after announcing its bankruptcy in November, indicating that these Robinhood shares were promised as collateral. The complaint from that time alleges that Emergent Fidelity Technologies "has custody of the collateral that belongs to BlockFi."
Though the latest filing claims that these shares actually belong to the bankruptcy estate, it argues instead that due to this list of creditors, the court should hold off on any distribution of these shares.
"The Court need find only that the Robinhood Shares are 'arguably' estate property, which requires a finding that Alameda has 'arguable claims of right to the [Robinhood Shares], or a colorable basis for asserting an interest in the [Robinhood Shares].'”
This "colorable" claim, the filing argues, is enough that the $450 million in Robinhood shares should "remain frozen."
FTX opposes BlockFi's claim to Bankman-Fried's Robinhood shares
Thu, December 22, 2022
By Dietrich Knauth
(Reuters) - Collapsed crypto exchange FTX on Thursday asked a U.S. bankruptcy judge to stop crypto lender BlockFi from laying claim to more than $440 million worth of Robinhood stock purchased by indicted FTX founder Sam Bankman-Fried.
BlockFi had filed a lawsuit on Nov. 28 demanding the turnover of 56 million Robinhood shares that were allegedly pledged as collateral for BlockFi's loans to the FTX-affiliated crypto hedge fund Alameda Research.
But FTX and Alameda went bankrupt without repaying the BlockFi loans, and U.S. bankruptcy law protects the companies from debt collection efforts like BlockFi's lawsuit, FTX said in a filing in U.S. bankruptcy court in Delaware.
FTX said it believes that the shares are actually owned by Alameda Research, and that the bankrupt FTX companies must hold onto the stock while investigating other disputed claims to the equity shares' ownership.
Bankman-Fried himself has claimed ownership of the Robinhood shares, and an individual FTX creditor has asked a court in Antigua, where FTX is incorporated, to make the Robinhood shares available to repay FTX creditors, according to FTX.
FTX said Bankman-Fried sought to claim the Robinhood shares as "a source of payment for legal expenses." Bankman-Fried was arraigned Thursday in New York on fraud charges, and released on a $250 million bond.
FTX, Alameda, and more than 100 FTX affiliates filed for bankruptcy protection on Nov. 11, after a three-day period in which customers withdrew $6 billion in assets from the crypto exchange.
FTX argued that BlockFi is attempting "an end-run" around U.S. legal protections for bankrupt companies by tailoring its lawsuit to target a non-bankrupt holding company rather than Alameda. Even though the company, Emergent Fidelity, holds the Robinhood shares, Alameda ultimately owns the shares and owes the debt to BlockFi, according to FTX.
BlockFi did not immediately respond to a request for comment.
Emergent holds a 7.42% share of Robinhood, according to Refinitiv data. Bankman-Fried began building his stake in Robinhood in the middle of March, according to a U.S. Securities & Exchange Commission filing.
(Reporting by Dietrich Knauth; Editing by Alexia Garamfalvi and Stephen Coates)
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