BlockFi sues Sam Bankman-Fried over Robinhood stock

Bankruptcy crypto lender BlockFi is suing Sam Bankman-Fried to seize shares in Robinhood that the FTX founder allegedly pledged as collateral just days before his exchange fall.

Monday’s lawsuit comes just hours after BlockFi filed it bankruptcy protection experienced “a severe liquidity crunch” due to the failure of Bankman-Fried’s FTX exchange.

BlockFi complaintwas filed in the same New Jersey court where it began bankruptcy proceedings, targeting Bankman-Fried’s emerging Fidelity Technology vehicle and ordering it to hand over unspecified collateral .

The collateral under dispute is Bankman-friedhis stake in Robinhood, the online commerce company, according to loan documents seen by the Financial Times. He bought a 7.6% stake in Robinhood earlier this year.

The dispute highlights the close connection between crypto projects and the messy debunking process that is beginning as bankruptcy attorneys sift through. ruins of FTX and other businesses affected by its demise.

The industry has suffered a series of defaults this year as a result of a major crisis of confidence that has swept the crypto market, pushing tokens like bitcoin and ethereum to their lowest prices since 2020.

Bankman-Fried has branded himself as a savior when crypto projects failed in June and has provided emergency financing to BlockFi that gave him an option to buy the lender at a fire sale price.

But on Monday, BlockFi said the Bankman-Fried exposure was ultimately its downfall, noting that his trading firm Alameda Research had defaulted on a $680 million mortgage loan. in early November.

BlockFi’s complaint claims that around the same time, on November 9, it and Emergent entered into an agreement to secure an unnamed borrower’s payment obligation by pledging certain “stocks” universal” as a guarantee. Legal correspondence included in the case identifying the borrower as Alameda.

The dispute is a sign of heavy pressure on Bankman-Fried, whose assets on paper almost disappeared overnight with the collapse of his $32 billion FTX empire. Authorities in the United States and the Bahamas, where FTX is headquartered, have opened investigations.

In the days before FTX filed for bankruptcy on November 11, Bankman-Fried rushed to raise billions of dollars in new financing. The spreadsheet he shared with investors listed his Robinhood stock as an asset.

In early November, the FT reported that Bankman-Fried tried to sell Robinhood stock privately using the secure messaging app Signal in the days before FTX filed for bankruptcy on Nov.

Bankman-Fried has continued to negotiate a sale of its Robinhood stake even after signing the pledge agreement, according to two people familiar with the matter.

According to messages seen by the FT, Bankman-Fried was still negotiating those purchases as of the evening of November 10.

BlockFi also named ED&F Man Capital Markets in the lawsuit as Emergent’s broker, claiming that the London-based broker “refused to transfer Collateral to BlockFi”.

Legal correspondence sent with the complaint indicates that ED&F Man refused to transfer assets “without an order from the Bankruptcy Court” in FTX proceedings in Delaware.

BlockFi and Bankman-Fried did not immediately respond to requests for comment. ED&F Man declined to comment beyond the correspondence on file.


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