On Thursday, BlockFi, an established crypto lender, took legal action to terminate the bankruptcy case of Emergent Fidelity Technologies. However, this is due to a rivalry concerning approximately $600 million in assets primarily owned by FTX founder Sam Bankman-Fried becoming increasingly complex. Emergent—an Antiguan shell company with 90% proprietorship belonging to Bankman-Fried—possesses 56 million shares of online broker Robinhood (HOOD) plus some money.
Currently, FTX, BlockFi, and the U.S. Department of Justice are at a legal impasse over these assets; to make matters worse, the Antiguan liquidators associated with Emergent have filed for Chapter 11 bankruptcy. In its filing, BlockFi noted: “The law nor equity don’t dictate an action if it is futile—yet this particular case asks us to ‘reorganize’ something that has no tangible values.”
On February 3, BlockFi declared that the bankruptcy filing had not been made in good faith since the company lacked employees and income and was not eligible. In addition, they argued that this case only existed to serve Antiguan liquidators who have already pocketed over $1.7 million in fees.
BlockFi has taken legal steps to safeguard stocks used as collateral for a loan they provided on November 9th. The Department of Justice confiscated these assets in January during their inquiry into fraud accusations against Sam Bankman-Fried and Gary Wang, who owns 10% of Emergent. While Bankman-Fried maintained his innocence, Wang eventually entered a plea deal with the court.