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U.S. authorities to seize US$460 mln of Robinhood shares in FTX fraud case

U.S. prosecutors are moving to seize the US$460 million worth of Robinhood Markets Inc., shares linked to Sam Bankman-Fried, the former chief executive officer of Bahamas-based bankrupt cryptocurrency exchange FTX.com

By Lachlan Keller

From the Forkast crypto archive

NEW YORK, NY – DECEMBER 22: FTX founder Sam Bankman-Fried leaves Manhattan Federal Court after his arraignment and bail hearings on December 22, 2022 in New York City. Bankman-Fried, who was indicted on December 9th and arrested 3 days later by Bahamas law enforcement at the request of U.S. prosecutors, consented to extradition to the U.S. where he is facing eight criminal counts of fraud, conspiracy and money-laundering offenses which includes making illegal political contributions. He is potentially facing life in prison if convicted. He was released on $250 million bond with the bail package requiring him to stay with his parents in California. (Photo by David Dee Delgado/Getty Images)

U.S. prosecutors are moving to seize the US$460 million worth of Robinhood Markets Inc., shares linked to Sam Bankman-Fried, the former chief executive officer of Bahamas-based bankrupt cryptocurrency exchange FTX.com, Department of Justice (DOJ) counsel Seth Shapiro told the bankruptcy judge on Wednesday.

See related article: Sam Bankman-Fried used Alameda Research money to buy Robinhood shares

Fast facts

  • Shapiro told the bankruptcy court hearing in Delaware that the DOJ does not believe the shares were the property of a bankruptcy estate, and its ownership could be determined in a forfeiture proceeding.
  • Bankman-Fried, who is currently awaiting trial after pleading not guilty to fraud charges, and FTX cofounder Gary wang formed a holding company in May 2022 called Emergent Fidelity Technologies Ltd. to purchase 56 million Robinhood shares with US$546 million in loans from Alameda Research, the brokerage arm of FTX.
  • Three parties, bankrupt crypto lender BlockFi, FTX creditor Yonathan Ben Shimon and Bankman-Fried, have filed court actions in attempts to gain control of the shares. 
  • Lawyers for FTX requested in late December that the shares remain frozen as the legal proceedings continue.
  • On Dec. 13, new FTX CEO John J. Ray III told congress that the exchange lost US$8 billion of customer deposits and that Bankman-Fried and select executives at the exchange had access to customer funds.
  • Bankman-Fried is facing charges of bank and wire fraud, money laundering and conspiracy, and could possibly spend the rest of his life in prison.
  • Wang and Caroline Ellison, the former chief of Alameda Research, have both accepted plea bargains for reduced sentences.

See related article: FTX asks court to keep US$450 mln Robinhood shares frozen