FTX Settles $600 Million Robinhood Shares Dispute with Emergent Technologies

TLDR:

• FTX has reached a settlement with Emergent Technologies over $600 million in Robinhood shares
• FTX will pay Emergent $14 million to cover expenses in exchange for Emergent withdrawing claims to the shares
• The shares were liquidated by Robinhood for $606 million on September 1, 2023
• The settlement helps FTX recover more funds for creditors and avoid further litigation costs
• A hearing on the motion is scheduled for October 22

FTX, the bankrupt cryptocurrency exchange, has reached a settlement agreement with Emergent Technologies over a dispute involving $600 million worth of Robinhood shares.

The deal, outlined in a motion filed by FTX CEO John Ray III in Delaware Bankruptcy Court on September 6, aims to resolve one of the many complex issues surrounding the collapse of Sam Bankman-Fried’s crypto empire.

Under the terms of the agreement, FTX will pay Emergent $14 million to cover administrative expenses related to withdrawing its petition to claim 55 million Robinhood shares and cash.

In exchange, Emergent will drop all claims to the shares and related cash. This settlement is a crucial step in FTX’s efforts to maximize value for its creditors and streamline its ongoing bankruptcy proceedings.

The Robinhood shares at the center of this dispute have been a contentious issue since FTX’s collapse in November 2022.

Emergent acquired approximately 56 million Robinhood shares, valued at around $600 million, in May 2022 through an agreement with Bankman-Fried and Alameda Research, the crypto trading firm he founded.

Following FTX’s bankruptcy, multiple parties, including FTX, BlockFi, Bankman-Fried, and Emergent, asserted ownership or rights to these shares.

The U.S. Department of Justice seized the disputed shares in January 2023 as part of its investigation into FTX’s collapse. On September 1, 2023, Robinhood repurchased the shares for approximately $606 million, effectively liquidating the asset at the center of the dispute.

Emergent Fidelity Technologies, the offshore investment firm co-founded by Bankman-Fried and former FTX co-founder Gary Wang, filed for Chapter 11 bankruptcy in February 2023.

The settlement agreement provides a path for Emergent to swiftly resolve its bankruptcy case in Antigua.

FTX CEO John Ray III emphasized in his declaration supporting the deal that the agreement resulted from “good faith arm’s length negotiations between the parties and that such negotiations were free of any collusion.”

This statement underscores the efforts to ensure transparency and fairness in resolving the complex web of claims surrounding FTX’s assets.

The settlement agreement includes several key provisions beyond the financial terms. Emergent, its Joint Liquidators, and Fulcrum (another party involved in the bankruptcy proceedings) have agreed not to object to any FTX reorganization plan that is consistent with the settlement terms.

This cooperation is crucial for FTX as it works towards developing a viable plan to repay creditors and potentially revive its operations.

The agreement outlines a process for obtaining approval from both the Delaware Bankruptcy Court and the Antigua Court. These approvals are necessary for the settlement to take effect and for the parties to move forward with resolving their respective bankruptcy cases.

The settlement also addresses the ongoing legal actions related to the disputed shares. FTX has agreed to dismiss or withdraw the BlockFi Action against Emergent promptly after the settlement becomes effective.

This provision helps clear the legal landscape and reduce ongoing litigation costs for all parties involved.

A hearing on the motion to approve this settlement is scheduled for October 22. If approved, this agreement will mark a significant milestone in FTX’s bankruptcy proceedings, removing one of the major disputes over its assets and providing a clearer path forward for the company’s restructuring efforts.