FTX files motion to keep Robinhood shares from BlockFi

Chicago, Dec. 22 – FTX Trading Ltd. and related debtor Alameda Research Ltd. filed a motion to enforce an automatic stay against the BlockFi Inc. adversary proceeding for 56 million Robinhood shares, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

Alternatively, the debtor is asking the court to extend the stay to nondebtor defendants in the BlockFi adversary proceeding.

The contested class A common stock of Robinhood Markets, Inc. (Nasdaq: HOOD – closing price on Thursday: $7.99 per share) in question is currently frozen in a brokerage account at ED&F Man Capital Markets Inc. in New York City.

On FTX’s petition date the shares were held by a nondebtor company organized in Antigua and Barbuda named Emergent Fidelity Technologies Ltd.

Emergent is a special-purpose holding company that has no other business and is 90% owned by Samuel Bankman-Fried, former chief executive officer of FTX Trading.

Since the Chapter 11 cases started, three different competing stakeholders of the debtors have filed court actions in different jurisdictions to gain control of the Robinhood shares, including BlockFi entities, Yonathan Ben Shimon (a prepetition creditor of FTX) and Bankman-Fried himself.

The debtors instructed EDFM to freeze the shares promptly after the Chapter 11 cases started, which has been confirmed.

The debtors assert that an investigation on its part indicate that the Robinhood shares are FTX property, only nominally held by Emergent.

The debtors assert that FTX has at least a “colorable” claim to the shares, meaning that the automatic stay should be enforced and the shares should remain frozen.

As evidence of this claim, when FTX’s imminent collapse was in sight, BlockFi moved to protect itself as a lender to Alameda and asked for additional collateral for loans it had made to Alameda for at least a three-year period.

Former chief executive officer of Alameda, Caroline Ellison, pledged over $1 billion worth of additional Alameda assets to secure loan obligations to BlockFi, including the Robinhood shares, despite the fact that the shares were nominally held by Emergent. This effort reveals that Alameda had then, and continues to have, a property interest in the Robinhood shares.

On Nov. 28 when BlockFi filed for bankruptcy protection, BlockFi sought turnover of the Robinhood shares in an adversary proceeding. The BlockFi proceeding was against Emergent, not Alameda as defendant.

Meanwhile creditor Ben Shimon has obtained a freezing injunction from an Antiguan court for the assets of Emergent, as the court finds that the assets were purchased with FTX funds so they should be available to pay pre-petition claims of creditors of FTX like Shimon.

Then, subsequently, Bankman-Fried petitioned the Antiguan court to displace the receivers so he could regain control of Emergent and the shares. His application in that court remains pending.

FTX is not currently asking the court to agree conclusively that the shares are estate property. They are arguably estate property, though, and as such the stay should be enforced for the shares.

FTX has headquarters in The Bahamas. The company filed Chapter 11 bankruptcy on Nov. 11 under case number 22-11068.

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