BlockFi seeks Bankman-Fried’s shares in Robinhood, citing the former FTX CEO used the investment as collateral for a pledge agreement.
The bankrupted crypto lender promised to pursue the obligations owed by FTX Group and affiliate companies. BlockFi’s statement later, after declaring its bankruptcy through chapter 11 filing, indicated initiating a lawsuit against Emergent Fidelity Technologies. The lawsuit identifies the defendant as the holding entity of Sam Bankman-Fried; it alleges he pledged his Robinhood shares as collateral in November.
The crypto lending platform revealed filing the lawsuit in the New Jersey District Court on November 28. Although in the same court, BlockFi clarified filing the suit hours after voluntarily initiating proceedings for Chapter 11 bankruptcy.
BlockFi Demands Collateral Pledged Settled
The documents submitted during the filing outline BlockFi is seeking Emergent Turnover utilized by Sam Bankman-Fried in the November 9 agreement. The crypto lending platform argues that Emergent approved the settlement schedule it has now failed to honour.
Further, BlockFi lists common stock shares as part of the collateral pledged on November 9. The suit documents show that Bankman-Fried has 7.6% ownership in Robinhood, a firm offering online brokerage. BlockFi claims the inclusion of Emergent Fidelity Technologies is justified as the investment vehicle used by Bankman-Fried in May to purchase $648 million shares.
Rescue that Weakened BlockFi to Bankruptcy
BlockFi filing for Chapter 11 bankruptcy arises from the liquidity crunch it suffered following the recent collapse of FTX. It affirms speculations that most of the crypto firm’s assets were locked on FTX. Although BlockFi has previously denied the assets held were significant, it confessed a substantial exposure to the crypto exchange formerly led by Bankman-Fried.
The court filing indicates BlockFi fate is entwined to FTX, a company that rescued it with a $400 million injection in June. The rescue gave FTX right to acquire BlockFi in future at a price not exceeding $240 million. The rescue promised by Bankman-Fried will help navigate the crypto market has weakened the once-hot lender to bankruptcy.
Established in 2017, BlockFi bridged cryptos and conventional financial products. Mark Renzi, the financial advisor from Berkeley Research Group, attributed BlockFi’s decline to the cryptocurrency market turbulence and significant exposure in crashed crypto firms, including Three Arrow Capital, Terra and FTX.
Renzi estimates BlockFi liabilities to match assets range from $1 billion to $10 billion. Further, the filing identifies Ankura Trust as owed $729 million in unsecured credit, with over 50 parties claiming at least $1 million.
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