The U.S. government could undergo a possible seizure of approximately $460 million worth of Robinhood Markets Inc. (HOOD) shares that are connected to insolvent FTX founder Sam Bankman-Fried (SBF).
Emergent Fidelity Technologies acquired a 7.6% stake in Robinhood, and Bankman-Fried served as both the company’s only director and its majority owner, according to a document filed by Robinhood with the Securities and Exchange Commission (SEC) in May of last year.
FTX, which declared bankruptcy on November 11, has asked a federal court to rule on the ownership of the Robinhood shares. Bankman-Fried, FTX creditor Yonathan Ben Shimon, and bankrupt cryptocurrency lender BlockFi are fighting to claim ownership.
The new FTX management has presented a motion to the Delaware bankruptcy court asking that the assets be kept frozen due to several parties making claims on the Robinhood shares until the court “can resolve the issues in a manner that is fair to all creditors of the debtors.”
“The question as to the ownership of those Robinhood shares was an open question before the seizure took place,” FTX attorney James Bromley remarked at the hearing on Wednesday.
Bromley emphasised that the Robinhood shares that federal prosecutors have taken possession of come from accounts that are not currently directly under the control of the insolvent FTX.
As for SBF, he has requested the court to grant him permission to maintain ownership of the 56 million shares of Robinhood that he holds.
The argument presented by SBF’s attorneys was that the shares were legitimately acquired using funds that Wang and SBF borrowed from Alameda Research and that the loan was duly documented. The filing reads: “It is improper for the FTX Debtors to ask the Court to simply assume that everything Mr. Bankman-Fried ever touched is presumptively fraudulent.”
The DOJ and several U.S. regulators like the SEC, have accused Bankman-Fried of fraud on numerous counts. SBF, however, has pled not guilty to all charges.
