U.S. Government Seize Robinhood Shares linked with Sam Bankman-Fried

The U.S. prosecutors has seized — or is in the process of seizing shares of Robinhood Markets Inc (NASDAQ:HOOD) hundreds of millions of dollars worth of Robinhood Markets shares as part of the fraud case against Sam Bankman-Fried (SBF), as the lawyers said in court on January 4th, 2023.

It must be noted that the seizures began as part of the fraud case against Mr. Bankman-Fried and the other FTX officials. And last month, Mr. Bankman-Fried was extradited from the Bahamas to face fraud charges in the US. 

James Bromley, a lawyer leading the main FTX insolvency proceeding in the US, said the U.S. government is also taking control of assets in bank accounts that were part of a bankruptcy case involving one unit of the FTX group in the Bahamas. He also said the “Robinhood shares were subject to litigation and it was an “open question” about who owns them.”

At present, the shares are worth more than $460 Million. It has been claimed by multiple creditors of FTX, who filed court cases to try to control of them. A court hearing will finally be held to investigate what actually happens to the shares and the assets seized from the bank accounts, Seth B. Shapiro, a lawyer with the U.S. Department of Justice said during a court hearing held by video in Wilmington, Delaware.

According to a Reuters report, Mr. Shapiro said that “competing claims to shares of the stock-trading app could be worked out in a forfeiture proceeding. Bankrupt crypto firm BlockFi, FTX and liquidators in Antigua have all laid claim to the Robinhood stock, along with Bankman-Fried.”

US prosecutors had seized U.S. bank accounts affiliated with FTX’s Bahamas-based business, known as FTX Digital Markets, Mr. Shapiro added. And the court records show the accounts at Silvergate Bank and Farmington State Bank, which does business as Moonstone Bank, held about $143 million.

However Mr. Bankman-Fried pleaded “not guilty” to counts of wire fraud and conspiracy. He has acknowledged risk-management failures at FTX, but denied that he was “criminally liable.”

The FTX founder bought around 7.42% of Robinhood’s stock through Emergent Fidelity Technologies Ltd, using funds borrowed from Alameda Research, FTX’s sister firm, according to an affidavit he filed in December 2022 in an Antigua court. Mr. Bankman-Fried owned 90% of Emergent and Gary Wang, another former FTX executive, owned 10%. However, Mr. Wang has pleaded guilty to fraud charges from the FTX collapse.

The Robinhood stock is also being claimed by BlockFi Inc, another bankrupt crypto firm as well as liquidators of Emergent. BlockFi is suing Emergent in a bid to seize the Robinhood stock, which was pledged by Alameda as collateral to guarantee repayment of a loan made by BlockFi. And just two days after the pledge, Alameda filed for bankruptcy along with FTX.

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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