About $450 million worth of Robinhood (NASDAQ: HOOD) stock was confiscated by the U.S. Department of Justice on Wednesday, Reuters reported. Attorney Seth Shapiro told prosecutors that the DoJ doesn’t believe that 56 million shares of Robinhood can be considered property of the bankruptcy estate since the said assets are currently subject to litigation and their legal owner is unclear.
Sam Bankman-Fried, the former FTX CEO charged with numerous counts of fraud in the collapse of his cryptocurrency exchange, purchased about 7.42% of Robinhood shares through the holding company Emergent Fidelity Technologies Ltd., which he formed in May together with FTX ex-CTO Gary Wang. According to an affidavit filed in December to the Antigua court, Bankman-Fried and Wang took a $546 million loan from Alameda to buy shares and owned 90% and 10% of the stock, respectively.
Read also: Crypto lender BlockFi files for Chapter 11, set to sue SBF
BlockFi, the now-insolvent digital asset lender, issued more than $600 million in loans to Alameda Research and FTX, which were overcollateralized with liquid assets, including Robinhood shares. However, both Alameda and FTX filed for Chapter 11 bankruptcy two days after the pledge, so BlockFi never received the promised collateral.
Currently, BlockFi, FTX, and Antigua-based Emergent liquidators have all laid claim to the Robinhood shares, as well as Bankman-Fried himself. According to Shapiro, the competing claims to the stock can be worked out in a forfeiture proceeding.
"The fact that multiple prepetition creditors of different Debtors and Mr. Bankman-Fried are all seeking to obtain possession of the Robinhood Shares demonstrates that the asset should be frozen until this Court can resolve the issues in a manner that is fair to all creditors of the Debtors," FTX said, quoted by CoinDesk.
