The U.S. Department of Justice (DOJ) is in the process of seizing Robinhood shares, worth about $460 million, that are linked to former FTX CEO Sam Bankman-Fried (SBF). “We believe that these assets are not property of the bankruptcy estate or that they fall within the exceptions … of bankruptcy code,” a DOJ attorney told the judge overseeing the FTX bankruptcy case.
DOJ Seizing Robinhood Shares Linked to FTX
The U.S. government is in the process of seizing 56 million shares of Robinhood Markets Inc. (Nasdaq: HOOD), worth about $460 million, that are linked to the disgraced FTX founder Sam Bankman-Fried (SBF), said Seth Shapiro, an attorney with the U.S. Department of Justice (DOJ) at an FTX bankruptcy court hearing in Delaware Wednesday.
Shapiro told Judge John Dorsey, who oversees the FTX bankruptcy case:
We believe that these assets are not property of the bankruptcy estate or that they fall within the exceptions … of bankruptcy code.
According to Robinhood’s filing with the Securities and Exchange Commission (SEC) in May last year, Emergent Fidelity Technologies took a 7.6% stake in Robinhood, and Bankman-Fried was its sole director and majority owner.
Following the FTX bankruptcy filing, the ownership of the Robinhood shares is disputed by the new FTX management, Bankman-Fried, an individual FTX creditor, and crypto lender Blockfi which also filed for bankruptcy in November last year.
Due to multiple parties laying claims to the Robinhood shares, the new FTX management has filed a motion to the Delaware bankruptcy court to keep the assets frozen until the court “can resolve the issues in a manner that is fair to all creditors of the debtors.”
FTX lawyer James Bromley said during Wednesday’s hearing: “The question as to the ownership of those Robinhood shares was an open question before the seizure took place.” He added:
We certainly believe we have rights with respect to those assets … We are in alignment at the present time with the U.S. government and the law enforcement officials in taking these steps.
Bromley stressed that the Robinhood shares being seized by Federal prosecutors are from accounts that are not currently under the direct control of the bankrupt FTX.
The DOJ and multiple U.S. regulators, including the SEC, have charged Bankman-Fried with multiple counts of fraud. However, the former FTX CEO has pleaded not guilty to all charges.
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