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Disgraced FTX founder Sam Bankman-Fried has asked a federal judge to allow him access to some $465 million worth of shares in Robinhood, saying he needs cash to pay his legal fees.
Attorneys for Bankman-Fried made the request in a motion filed on Thursday night with the judge overseeing FTX’s bankruptcy, arguing that the 56.3 million shares of Robinhood are owned by an entity that is not party to the proceedings.
Bankman-Fried, whose net worth was once estimated at $15.6 billion, has said that he has about $100,000 in cash reserves remaining after his cryptocurrency exchange collapsed and he was charged with fraud.
After pleading not guilty to eight federal counts of fraud and conspiracy earlier this week, he faces a costly legal battle if the matter goes all the way to trial.
Disgraced FTX founder Sam Bankman-Fried has asked a federal judge to allow him access to some $465 million worth of shares in Robinhood to pay for his legal fees
‘Bankman-Fried requires some of these funds to pay for his criminal defense,’ states the motion requesting the release of the shares.
In the motion, Bankman-Fried’s lawyers say that the Robinhood shares are owned by Emergent Fidelity Technology, a company controlled by Bankman-Fried.
They argue that because Emergent is not a party to the bankruptcy, a prior request from the FTX debtors to freeze the shares should be rejected by the court.
However, the motion acknowledges that for practical purposes the question is moot, as the US Justice Department has already seized the shares as part of the criminal case against Bankman-Fried.
On Wednesday, US prosecutors confirmed they are are in the process of seizing the Robinhood shares.
The Department of Justice did not believe the 56 million shares of Robinhood, worth about $465 million, were property of a bankruptcy estate, US attorney Seth Shapiro told US Bankruptcy Judge John Dorsey, who is overseeing the FTX bankruptcy.
Shapiro said that competing claims to shares of the stock-trading app could be worked out in a forfeiture proceeding.
Bankman-Fried’s lawyers say that the Robinhood shares are owned by Emergent Fidelity Technology, a company controlled by Bankman-Fried
Bankrupt crypto firm BlockFi, FTX and liquidators in Antigua have all laid claim to the Robinhood stock, along with Bankman-Fried’s own claim in court.
Prosecutors have accused Bankman-Fried of engaging in a years-long ‘fraud of epic proportions’ that cost investors, customers and lenders potentially billions of dollars by using customer deposits to prop up his Alameda Research hedge fund.
Bankman-Fried pleaded not guilty to counts of wire fraud and conspiracy. He has acknowledged risk-management failures at FTX, but has said he did not believe he was criminally liable.
Bankman-Fried purchased about 7.42 percent of Robinhood’s stock through Emergent Fidelity Technologies Ltd, using funds borrowed from Alameda Research, according to an affidavit he filed in December in an Antigua court.
Bankman-Fried said he owned 90 percent of Emergent and Zixiao ‘Gary’ Wang, another former FTX executive, owned 10 percent.
Wang has pleaded guilty to fraud charges from the FTX collapse and is cooperating with prosecutors in a bid for leniency.
FTX founder Sam Bankman-Fried smiles as he leaves court after pleading not guilty to criminal charges that he defrauded investors in his crypto exchange out of $1.8billion
Shapiro also said prosecutors had seized U.S. bank accounts affiliated with FTX’s Bahamas-based business, known as FTX Digital Markets.
Court records show the accounts at Silvergate Bank and Farmington State Bank, which does business as Moonstone Bank, held about $143 million
James Bromley, an attorney for FTX, told Dorsey that none of the assets targeted for seizure are currently in the direct control of any of FTX entities in Chapter 11. He said the Robinhood shares were subject to litigation and it was an ‘open question’ about who owns them.
The Robinhood stock, which closed on Wednesday at $8.36 per share, is also being claimed by BlockFi Inc, another bankrupt crypto firm as well as liquidators of Emergent, which is in insolvency proceedings in Antigua, where it is incorporated.
BlockFi is suing Emergent in a bid to seize the Robinhood stock, which was pledged by Alameda as collateral to guarantee repayment of a loan made by BlockFi. Two days after the pledge, Alameda filed for bankruptcy along with FTX.
BlockFi and Robinhood did not immediately respond to a request for comment.
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