The recently bankrupt crypto lender BlockFi is suing FTX CEO Sam Bankman-Fried to obtain shares of Robinhood he allegedly pledged to the company as collateral earlier this month.
The filing, which was initially reported by The Financial Times, came just hours after BlockFi filed for bankruptcy, citing “a liquidity crisis” caused by exposure to Bankman-Fried’s FTX exchange and its sister hedge fund Alameda research.
The lender’s complaint alleges that Bankman-Fried's investment vehicle Emergent Fidelity Technologies, in partnership with ED&F Man, a New York-based financial services firm that acted as a broker for Bankman-Fried, “has custody of the collateral that belongs to BlockFi.”
Crypto Lender BlockFi Filing for Bankruptcy and Conducting Major Layoffs as FTX Contagion Claims Another: Source
The FTX contagion has just claimed another crypto firm. BlockFi will file for Chapter 11 bankruptcy protection later today, a source at the company tells Decrypt. In an official announcement, the New Jersey-based company said it "will focus on recovering all obligations owed to BlockFi," but that "recoveries from FTX will be delayed" due to the ongoing bankruptcy proceedings at the fallen crypto exchange. The crypto lender is also laying off a large portion of its staff, the source said. BlockF...
These assets were pledged to BlockFi under the terms of an agreement made on November 9, according to the filing.
Bankman-Fried first bought his 7.6% stake in consumer trading app Robinhood in May 2022, according to a filing with the U.S. Securities and Exchange Commission, which at the time would have been worth around $600 million.
The filing, lodged in the same New Jersey court BlockFi opted for bankruptcy protection, goes on to claim that Bankman-Fried’s vehicle has “defaulted on its obligations under the pledge agreement” and that it “ failed to satisfy its obligations thereunder despite written notice of default and acceleration.”
The bankrupt lender said it will now look to “enforce the terms of a pledge agreement and to recover collateral that is property of these bankruptcy estates.”
FTX founder scrambles to find funds
The Financial Times also alleges, citing unnamed and unconfirmed sources, that Bankman-Fried had been listing his stake in Robinhood among his list of assets, as he undertook last-ditch efforts earlier this month to raise money from investors to attempt to save FTX.
Decrypt has contacted both ED&F Man and Robinhood for comment on the news.
Robinhood Is Down 20% After Binance Announces FTX Acquisition
The price of publicly traded exchange Robinhood stock is down 20%, to around $9.74, on news that Binance will acquire Sam Bankman-Fried's FTX, which took a 7.6% stake in the popular trading platform in May. Robinhood opened the day trading at $11.72 before news of the FTX buyout became known. Robinhood $HOOD closed down 19% today. FTX CEO Sam Bankman-Fried has 56,273,469 shares in $HOOD There's speculation that Bankman-Fried will have to sell some or all of the 7.6% stake to shore up some pers...
BlockFi was not the only instance of Bankman-Fried promising huge sums to save other embattled firms amid the harsh crypto winter of earlier this year.
In August 2022, FTX offered to buy troubled crypto lender Voyager in a $70 million deal, which has now left the firm scrambling to find a new buyer.
