(Kitco News) -
U.S. prosecutors have decided to seize $458 million worth of disputed Robinhood shares purchased by former FTX CEO Sam Bankman-Fried, the Department of Justice (DoJ) told a bankruptcy judge on Wednesday.
According to reports, U.S. attorney Seth Shapiro told Judge John Dorsey, who is overseeing the bankruptcy proceedings of the FTX exchange, that the DoJ does not consider the 56 million shares of Robinhood to be part of the FTX bankruptcy estate. Shapiro said that the competing claims to shares made by bankrupt crypto firm BlockFi, FTX, Antigua liquidators and Bankman-Fried himself should instead be worked out in a forfeiture proceeding.
Shapiro said prosecutors also seized the funds in U.S. bank accounts affiliated with Bahamas-based FTX Digital Markets, with court records showing the Silvergate Bank and Farmington State Bank accounts contained approximately $143 million.
FTX attorney James Bromley told the judge that none of the assets targeted for seizure by the DoJ are currently under their control, and conceded that it was an “open question” who owns the Robinhood shares.
According to an affidavit Bankman-Fried filed in an Antigua court in December, he purchased the 7.42% stake in Robinhood through Emergent Fidelity Technologies Ltd using funds he borrowed from Alameda Research. Bankman-Fried owned 90% of Emergent, with former FTX cofounder Gary Wang owning the remaining 10%.
On Dec. 22, FTX asked a U.S. court to freeze the Robinhood shares to block BlockFi’s claim on them after the bankrupt crypto lender filed a motion to sue Emergent, arguing that Alameda had pledged the stock to back $680 million in loans promised to BlockFi.
“BlockFi is entitled to use and possession of the Collateral under the Pledge Agreement because Emergent defaulted on its obligations thereunder and failed to cure the default,” they wrote in the motion. “The Collateral is property of the BlockFi bankruptcy estates and is valuable and beneficial to the BlockFi bankruptcy estates.”
BlockFi was one of the first victims of the ongoing contagion in the crypto ecosystem that was unleashed in the wake of the Nov. 11 bankruptcies of FTX and sister fund Alameda Research. Shortly afterward, BlockFi announced that they had “significant exposure” to FTX, including “obligations owed to us by Alameda, assets held at FTX.com, and undrawn amounts from our credit line with FTX.US.” BlockFi was forced to declare its own bankruptcy on Nov. 28.
