Consequences of the FTX scandal at the hands of its founder and former CEO, Sam Bankman Fried, continue to surface.
On Feb. 17, it was reported that the bankrupt crypto lender BlockFi Inc. 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 liquidators, said the bankruptcy was filed to ensure protection for the rights of its creditors, “whoever they may be.”
Quantuma director Toni Shukla said that given that there are many parties claiming to be creditors or “outright owners” of Emergent’s assets in various lawsuits taking place in the U.S.:
“…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 from Shukla, she clarified that Emergent owns no substantial assets aside from the shares, along with o$20.7 million in cash which has been seized by prosecutors. She said it’s “ wrong, and without basis” for BlockFi to claim the bankruptcy was filed with a motivation of 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.
BlockFi is bankrupt since Nov. 28, 2022, when it filed for Chapter 11 bankruptcy as part of the contagion 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 of their rightful owner.