The consequences of the FTX scandal at the hands of its founder and former CEO, Sam “SBF” Bankman-Fried, continue to surface.
On Feb. 17, it was reported that bankrupt crypto lender BlockFi has appealed to the United States Bankruptcy Court in Wilmington, Delaware to strip the Chapter 11 bankruptcy protections from SBF’s offshore investment vehicle.
Emergent Fidelity Technologies Ltd. was used by the FTX founder to purchase a 7.6% stake in Robinhood Markets Inc. According to BlockFi’s motion, the bankruptcy status of Emergent Fidelity holds little purpose and was filed to undermine BlockFi’s own claim to shares of Robinhood.
However, a spokesperson from financial adviser Quantuma, Emergent’s liquidator, said the bankruptcy was filed to ensure protection for the rights of its creditors, “whoever they may be.”
Quantuma director Toni Shukla said there are many parties claiming to be creditors or “outright owners” of Emergent’s assets in various lawsuits taking place in the U.S., meaning that:
“The [liquidators] believe that Chapter 11 protection is the only practical way to empower Emergent to defend itself, its assets and its creditors’ interests in the U.S.”
In an affidavit, Shukla clarified that Emergent owns no substantial assets aside from the shares, along with $20.7 million in cash that has been seized by prosecutors. She said it’s “wrong, and without basis,” for BlockFi to claim the bankruptcy filing was motivated by fees.
Robinhood has commented saying it would like to buy the shares back, though it also acknowledged that it is uncertain whether it can do so.
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BlockFi filed for Chapter 11 bankruptcy on Nov. 28, 2022 as the contagion spread from the FTX collapse earlier in the month.
Back in December, it was FTX who appealed to the bankruptcy judge to stop BlockFi from claiming nearly $450 million worth of Robinhood shares, which were purchased by SBF.
The judge considered transferring the Robinhood shares claimed by both BlockFi and FTX to either a neutral broker or an escrow account while the courts deliberate on their rightful owner.