Online brokerage Robinhood announced on Wednesday that its board of directors has approved the buyback of a 7.6% stake in the company Sam Bankman-Fried bought by the founder of now-defunct cryptocurrency exchange FTX in May 2022.
The shares are owned by an entity called Emergent Fidelity Technologies, a holding company Bankman-Fried and former FTX executive Gary Wong used to buy a stake in the brokerage, and are currently worth more than $550 million. Emergent, which filed for bankruptcy last Friday, owns 55 million shares of Robinhood, according to a board announcement.
“Since there are limited instances for this type of position to occur, we cannot predict when, or if, share purchases will occur,” Robinhood said in its fourth-quarter earnings press release. “We will provide updates as appropriate.”
Robinhood’s announcement potentially ends a months-long battle to own a significant stake in the online brokerage after FTX filed for bankruptcy in November 2022, as creditors try to recoup any funds. do what they can with the now-defunct cryptocurrency exchange.
BlockFi, a crypto lender that went belly up shortly after the collapse of FTX, sued Emergent in late December 2022 for control of Robinhood’s shares. It said that Bankman-Fried and Wong had raised a $546 million loan from Alameda to Bankman-Fried and Wong to buy Emergent’s stake in Robinhood, a crypto hedge fund that was part of Bankman-Fried’s once-expanding crypto empire. was part of.
A little more than a week later, in early January, a Justice Department attorney told a federal judge that the government was in the process of seizing Bankman-Fried’s shares. The disgraced founder of FTX owned a 90% stake in Emergent Fidelity Technologies, and Wong owned 10% of the holding company.
Bankman-Fried’s attorneys soon filed an objection to the Justice Department’s seizure in FTX’s bankruptcy proceedings. He added that Emergent was not a party to FTX’s bankruptcy case, as it is not owned by Alameda or any of the other entities involved in the proceedings.
Bankman-Fried’s attorneys cited case law, writing that the disgraced crypto mogul is in need of Robinhood shares for legal fees because of “serious consequences for his financial inability to defend himself.”
Robinhood is reportedly in talks with the Justice Department regarding a share buyback. “We believe this will continue to grow over time and will remove the distraction for shareholders,” Vlad Tenev, the brokerage’s CEO, said on Wednesday’s earnings call.
Robinhood shares rose nearly 5 percent in after-hours trading after its earnings report, which included news of a continued decline in crypto trading revenue.
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