In the most recent development, Sam Bankman-Fried (SBF), ex-CEO of defunct crypto exchange FTX, is petitioning the court to stop debtors from gaining access to his holdings in Robinhood. According to U.S. prosecutors’ reportage, these shares are worth an astounding $450 million.
In December 2022, the U.S. filed criminal charges against SBF following his apprehension by the Royal Bahamas Police Force, leading to him to being placed under house arrest. Unfortunately for many investors, this was only weeks after his crypto exchange had crashed and caused massive losses for multiple people across the globe.
Liquidators appointed by the court have taken over FTX Exchange and Alameda Research. However, these liquidators search for assets available to pay off FTX debtors.
At the initial court session, a U.S. Department of Justice prosecutor announced their strategy to take over SBF’s stock valued at $450 million. Meanwhile, the upcoming hearing will reveal what actions the Department of Justice took concerning Robinhood shares.
Sam Bankman-Fried filed a motion to the United States Bankruptcy Court in Delaware, challenging attempts by creditors to seize control of his Robinhood shares. According to the court filing, he asserts that these assets have no affiliation with FTX or other related firms.
In a legal filing on Thursday, the lawyers for SBF argued that their client needs money to cover his costs associated with legal representation.
Consequently, many companies exposed to the now-defunct exchange face a domino effect of its collapse. Genesis Trading is among these casualties, as well as BlockFi—the crypto lending firm which has filed for bankruptcy and is seeking reparations from Robinhood shares.
According to BlockFi, Sam Bankman-Fried had agreed to provide a loan of $600 million utilizing the Robinhood shares as collateral in the event of an emergency. The ex-CEO then signed agreements with BlockFi for a bailout amounting to $240 million come July 2022. As such, when disaster struck, and bankruptcy ensued – it was revealed that BlockFi had been significantly exposed via its ties with FTX priorly.
Before BlockFi’s bankruptcy, customers of FTX initiated a class action lawsuit against Sam Bankman-Fried and his exchange. In the suit, they argued their entitlement to all remaining assets belonging to FTX. A class action is when an individual takes legal steps on behalf of a group whose members are not necessarily in court.
The crypto exchange FTX is facing a flurry of legal action after they revealed that more than one million creditors have filed for bankruptcy. Many renowned celebrities, including Tom Brady, were hit hard by the financial losses reportedly tied to their investments in FTX. Sam Bankman-Fried and his company are also under investigation by several law enforcement and regulatory agencies.