FTX to Pay $14M to Reclaim $600M in Robinhood Shares

Coinspeaker
FTX to Pay $14M to Reclaim $600M in Robinhood Shares

FTX, the bankrupt cryptocurrency exchange, has reached a significant agreement to regain control of over $600 million in Robinhood shares. The exchange will pay $14 million to Emergent Fidelity Technologies, a firm founded by FTX’s ex-CEO Sam Bankman-Fried, in order to cover administrative expenses.

This settlement, outlined in a motion filed by FTX CEO John Ray III on September 6, 2023, also involves Emergent withdrawing its claim to 55 million Robinhood shares, clearing a major hurdle in FTX’s efforts to maximize the value returned to its creditors.

Strategic Agreement Aims to Maximize Creditor Value

This deal is seen as a crucial step in FTX’s broader reorganization strategy. By reaching this settlement, FTX aims to avoid prolonged and costly legal battles that could diminish the funds available for creditor reimbursement. FTX emphasized that the agreement was reached through “good faith” negotiations, conducted without any improper influence. Additionally, the settlement will help Emergent resolve its own bankruptcy proceedings in Antigua more efficiently.

The Robinhood shares in question were originally acquired by Emergent in May 2022, following an agreement with Bankman-Fried and his trading firm, Alameda Research. However, after FTX’s sudden collapse in November 2022, several parties, including FTX, Emergent, BlockFi, and Bankman-Fried himself, laid claim to these shares. In January 2023, the US Department of Justice seized the shares as part of its investigation into FTX’s financial practices. The shares were later sold back to Robinhood on September 1, 2023, for approximately $606 million.

Resolution of Complex Legal Disputes

This settlement is one of several legal battles that FTX has faced since its collapse. The exchange, once valued at $32 billion, fell apart after a liquidity crisis exposed its misuse of customer funds. FTX had reportedly used these funds for high-risk investments and other personal expenditures by Bankman-Fried and his associates. Following its collapse, FTX filed for Chapter 11 bankruptcy, and Bankman-Fried was later sentenced to 25 years in prison for fraud and money laundering.

In August, FTX was ordered to pay $12.7 billion to compensate customers and fraud victims, marking the largest recovery in the history of the Commodity Futures Trading Commission (CFTC). This ruling came after nearly two years of legal proceedings initiated by the CFTC in December 2022.

Next Steps in FTX’s Bankruptcy Process

A hearing on the settlement agreement is scheduled for October 22, 2023, where the court will determine whether to approve the deal. If the agreement is approved, it could accelerate the resolution of both FTX’s and Emergent’s bankruptcy cases, potentially bringing some relief to creditors who have been waiting for compensation since FTX’s collapse.

As FTX continues to navigate its complex bankruptcy proceedings, this $14 million payment represents a strategic effort to unlock significant assets, reflecting the company’s focus on maximizing creditor recoveries and moving closer to a resolution.

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FTX to Pay $14M to Reclaim $600M in Robinhood Shares