Bankrupt crypto lender BlockFi has filed a motion to dismiss the bankruptcy case for Emergent Fidelity Technologies, the holding firm owned by Sam Bankman-Fried (SBF), founder and former CEO of FTX.
In the motion, filed on Thursday in the United States Bankruptcy Court for the District of Delaware, BlockFi argued that Emergent is not eligible for a bankruptcy case as it has no other assets than 56 million Robinhood shares.
BlockFi Seeks to Dismiss Emergent’s Bankruptcy Case
Recall that Emergent filed for voluntary Chapter 11 bankruptcy protection on February 5, almost three months after FTX became insolvent.
The company, which is 90% owned by SBF and 10% by former FTX executive Gary Wang, had just $20.7 million in cash, 56 million Robinhood shares worth roughly $600 million, and no other assets.
The Robinhood stake has been a bone of contention between SBF and BlockFi due to a lending relationship between both parties. Shortly after filing for bankruptcy in November, BlockFi sued SBF and Emergent over custody of the Robinhood stock.
During the court hearing in December, the crypto lender explained that the shares were pledged as collateral during a $680 million loan agreement with Emergent involving FTX’s sister firm Alameda Research, in November.
Although the stakes are currently in the custody of the U.S. Department of Justice (DOJ), BlockFi insists on Emergent’s ineligibility for a bankruptcy case.
“Neither law nor equity require the doing of a futile act. But this bankruptcy case asks the Court to do just that – to “reorganize” an empty shell. Emergent has no employees, no income, and no business; its sole assets were shares in Robinhood Markets Inc. (the “Shares”) worth hundreds of millions of dollars,” BlockFi said.
“A Last-ditch Litigation Tactic”
Furthermore, BlockFi argued that Emergent filed for bankruptcy as “a last-ditch litigation tactic,” as it is not seeking to maximize the value of its assets or preserve itself.
The distressed lender also insisted that the bankruptcy case existed only to enrich Emergent’s liquidators, who have already received $1.7 million in fees.