In the latest development on the FTX liquidity crisis, the US Justice Department has filed to seize all the shares of Robinhood that FTX holds. Shares are worth $450 million and are reportedly being sought by FTX creditors and BlockFi, which has claimed that shares were committed to them by Sam Bankman-Fried.
Seth Shapiro, the US Attorney, has said that they will file a notice for the benefit of the court so that it knows what’s happening in the case and what is actually being held up in the government’s possession.
FTX is currently scrambling to react to multiple parties who claim that the shares are being held pursuant to a court order. James Bromley, an attorney for FTX, confirmed that debtors no longer have authority over accounts, including shares. He emphasized further that the items being confiscated are associated with Robinhood.
The ownership of these shares is unclear; nonetheless, FTX creditors and BlockFi have claimed ownership in accordance with Sam Bankman-Fried’s commitment.
A final call will be taken after the court concludes. The presiding judge has reserved the date of January 20, 2023, to solely deal with the case of FTX, including Robinhood shares and other matters on a similar plate.
Robinhood shares were purchased in May 2022 by Sam Bankman-Friend and Gary Wang, a Co-Founder of FTX, through the formation of a holding company, Emergent. It has been revealed in the affidavit filed in December 2022 that these shares were purchased by taking a loan from Alameda Research. The loan, which has a valuation of $546 million, was taken only to purchase the shares.
In a statement released on Wednesday, James Bromley stated that shares had been confiscated according to a court order in connection with a case in which Sam, Wang, and Ellison are accused of bank and wire fraud, money laundering, and conspiracy. It is a crucial step because if all parties involved are found guilty of all charges, they might spend the rest of their lives in prison.
FTX once ruled the industry, with hopes high enough to touch the sky. Sam Bankman-Fried, the young prodigy, looked to lead the venture toward the end of the tunnel, where only FTX was at the top spot. Things turned bad after FTX declared a liquidity crisis, which later turned out to be a much bigger problem for the entire industry.
Charges against the parties involved are serious offenses. The US Justice Department is yet to line up the details of what it has seized. FTX creditors will have to wait a little longer. As for FTX, it can only work to get through Chapter 11 bankruptcy to revive its lost business. Trading in FTX until then poses risks and should be done with caution.
