Court filings reveal that debtors from FTX Trading Ltd. and Alameda Research are seeking to freeze 56 million shares of Robinhood stock owned by Emergent Fidelity Technologies, a subsidiary created by Sam Bankman-Fried (SBF). The shares, valued at approximately $450 million, have become the subject of intense legal disputes as multiple creditors, including BlockFi and SBF himself, claim ownership.
FTX Demands an Automatic Stay
On December 22, 2022, FTX debtors submitted a motion requesting the court to enforce an automatic stay against all claims over the 56 million Robinhood shares. The Class A common stock is currently held in custody by ED&F Man Capital Markets Inc. (EDFM) in New York City, which has not challenged the ownership. The filing emphasizes that BlockFi Inc., creditor Yonathan Ben Shimon, and SBF are all seeking to take possession of the shares.
The debtors assert that they have 'at least a colorable claim' to the Robinhood shares, arguing that the asset must be frozen until the court resolves competing claims fairly. 'The fact that multiple prepetition creditors of different Debtors and Mr. Bankman-Fried are all seeking to obtain possession of the Robinhood Shares demonstrates that the asset should be frozen until this Court can resolve the issues in a manner that is fair to all creditors of the Debtors,' the filing states. FTX added that a complete evidentiary record will ultimately show the shares are estate property.
Caroline Ellison's Attempted OTC Sale and Pledge
The court documents shed light on previous actions involving the shares. Alameda’s former CEO Caroline Ellison allegedly attempted to sell the Robinhood stock through an over-the-counter (OTC) deal. Subsequently, she reportedly pledged the shares to BlockFi as collateral for Alameda’s debts, part of an effort to prevent the crypto lender from defaulting and filing for bankruptcy. According to the filing, BlockFi CEO Zac Prince accepted Ellison’s offer, securing the Robinhood shares and other Alameda assets as guarantees.
The legal battle over these shares is unfolding against the backdrop of FTX's catastrophic collapse in November 2022, one of the largest bankruptcy cases in cryptocurrency history. The case involves claims from hundreds of thousands of creditors worldwide, and the outcome of the Robinhood share dispute could set a precedent for asset recovery in crypto bankruptcies.