Disgraced FTX founder Sam Bankman-Fried has filed a request to keep hold of his 56 million shares of the consumer trading app Robinhood, worth roughly $450 million at current prices.
In a court filing, SBF's representatives say he requires some of these funds to pay for his criminal defense, citing U.S. case law which found that the financial inability to defend oneself may constitute “irreparable damage” to the impacted party.
In addition, the filing argued that requests by debtors to get hold of the funds should be denied as they “have failed to carry their heavy burden of demonstrating that they are entitled to this form of relief.”
gm: FTX Meltdown 101: What the Hell Happened and What Comes Next
In less than a week, one of the largest and most trusted crypto exchanges went up in flames, along with its crypto celebrity founder and CEO Sam Bankman-Fried. Dan Roberts, Stacy Elliott, and Kate Irwin from the gm podcast walk you through exactly how it happened, what it means for you, their own takes on the most interesting subplots, and what we can learn from it all. Plus: We review some comments SBF and CZ made on this podcast that look remarkable in hindsight. Watch and make sure to subscribe to the gm podcast on Apple or Spotify.
SBF acquired his 7.6% stake in Robinhood via his holding company Emergent Fidelity Technologies 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 battle for SBF’s assets
However, several parties including crypto broker BlockFi—and FTX itself, under new management—are attempting to get their hands on SBF’s few remaining assets of value.
In December 2022, FTX, now under the control of new CEO John J. Ray III, requested that the court overseeing the exchange's bankruptcy freeze SBF’s 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."
Defunct crypto lender BlockFi, which slid into bankruptcy in November 2022, has alleged that the assets were pledged to it under the terms of an agreement made on November 9.
The lender claimed that Bankman-Fried’s investment 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.”
Regulators Seize Millions in Robinhood Shares from FTX
The U.S. Justice Department said in a Delaware bankruptcy court hearing that it had taken custody of $450 million in Robinhood shares from FTX. In May 2022, then-CEO Sam Bankman-Fried and FTX cofounder Gary Wang formed a holding company called Emergent to purchase shares in the publicly traded Robinhood platform. In an affidavit filed in December, Bankman-Fried and Wang said they used funds taken in loans totaling $546 million from Alameda Research to buy the shares. A lawyer for FTX noted in th...
These legal disputes are all largely theoretical, as the United States Department of Justice obtained a warrant to seize the assets earlier this week.
The court filing admits this makes the requests by the debtors “moot,” but noted that SBF is legally “compelled to reply” to the debtor's requests.
