The fallout from the FTX scandal at the hands of its founder and former CEO, Sam Bankman Fried, continues to surface.
On February 17, it was reported that bankrupt crypto lender BlockFi Inc. has appealed to the United States Bankruptcy Court in Wilmington, Delaware, to strip the Chapter 11 bankruptcy protections of SBF’s offshore investment vehicle.
The FTX founder used Emergent Fidelity Technologies Ltd. to buy a 7.6% stake in Robinhood Markets Inc. According to BlockFi’s motion, Emergent Fidelity’s bankruptcy status serves little purpose and was filed to undermine BlockFi’s right to Robinhood shares.
However, a spokesman for financial adviser Quantuma, Emergent’s liquidators, said the bankruptcy was filed to ensure the protection of the rights of its creditors, “whoever they are”.
Quantuma director Toni Shukla said that since there are many parties claiming to be creditors or “outright owners” of Emergent’s assets in various lawsuits taking place in the US:
“…He [liquidators] believe that Chapter 11 protection is the only practical way to empower Emergent to defend itself, its assets, and the interests of its creditors in the US.”
In an affidavit from Shukla, he clarified that Emergent has no substantial assets other than the shares, along with $20.7 million in cash that has been seized by prosecutors. She said it is “incorrect and baseless” for BlockFi to claim the bankruptcy was filed with a fee motivation.
Robinhood has commented, saying it would like to buy back the shares, although it also acknowledged that it is not sure if it can do so.
Related: Judge allows release of identities of guarantors behind Sam Bankman-Fried bail
BlockFi has been in bankruptcy since November 28, 2022, when it filed for Chapter 11 bankruptcy as part of the contagion from the FTX collapse earlier in the month.
In December, it was FTX that appealed to the bankruptcy judge to prevent BlockFi from reclaiming almost $450 million in Robinhood shares, which were bought by SBF.
The judge considered transferring the Robinhood shares claimed by both BlockFi and FTX to a neutral broker or escrow account while the courts deliberate on their rightful owner.
