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Thursday, June 8, 2023

US Government Seizes Robinhood Shares Linked to FTX Founder Sam Bankman-Fried

US Government Seizes Robinhood Shares Linked to FTX Founder Sam Bankman-Fried – The U.S. government is in the process of seizing 56 million shares of Robinhood Markets Inc. (Nasdaq: HOOD), valued at approximately $460 million, that are linked to the disgraced FTX founder Sam Bankman-Fried (SBF), according to U.S. Department of Justice (DOJ) attorney Seth Shapiro, who spoke at an FTX bankruptcy court hearing in Delaware on Wednesday. Judge John Dorsey, who handles the FTX bankruptcy case, was informed by Shapiro that “We believe that these assets are not property of the bankruptcy estate or that they fall within the exceptions of bankruptcy code.”

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In May of last year, Robinhood disclosed to the Securities and Exchange Commission (SEC) that Emergent Fidelity Technologies had acquired a 7.6% stake in the company and that Bankman-Fried was its sole director and majority owner. The ownership of the Robinhood shares is disputed by the new FTX management, Bankman-Fried, an individual creditor of FTX, and crypto lender Blockfi, which filed for bankruptcy in November of last year.

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Due to multiple parties laying claims to the Robinhood shares, the new FTX management has filed a motion to the Delaware bankruptcy court to keep the assets frozen until the court “can resolve the issues in a manner that is fair to all creditors of the debtors.” FTX lawyer James Bromley said during Wednesday’s hearing: “The question as to the ownership of those Robinhood shares was an open question before the seizure took place.” He added: “We certainly believe we have rights with respect to those assets.”

“We are in alignment at the present time with the U.S. government and the law enforcement officials in taking these steps.” Bromley stressed that the Robinhood shares being seized by Federal prosecutors are from accounts that are not currently under the direct control of the bankrupt FTX. The DOJ and multiple U.S. regulators, including the SEC, have charged Bankman-Fried with multiple counts of fraud. However, the former FTX CEO has pleaded not guilty to all charges.

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