The Feds have taken control of the 56 million shares of the trading app Bankman-Fried bought in May, saying it is not the property of the FTX bankruptcy estate.
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In a sign that the fight for control of the bankrupt FTX exchange's assets is escalating, the U.S. Justice Department has seized 56 million shares of stock-and-crypto trading app Robinhood that Sam Bankman-Fried purchased in May.
U.S. Attorney Seth Shapiro informed the Delaware bankruptcy court overseeing the looted exchange's case that federal prosecutors do not believe the stock, worth $456 million, is the property of the bankruptcy estate. Instead, Shapiro said it may be subject to a forfeiture hearing, Reuters reported.
Bankman-Fried has been charged with looting as much as $10 billion from one million FTX customers — secretly transferring the funds to the trading firm with the help of several top lieutenants, including Alameda CEO Caroline Ellison and FTX/Alameda CTO Gary Wang. Both have pleaded guilty to fraud and conspiracy charges, and are cooperating with the prosecution of Bankman-Fried.
Shapiro also noted that the Justice Department has seized bank accounts from two crypto-focused banks: Silvergate Bank and Moonstone Bank. These funds were associated with FTX Digital Markets, the Bahamian branch of the exchange.
Both the bankruptcy court and federal officials have clashed with authorities in The Bahamas over control of the process and the seizure of hundreds of millions of dollars in crypto by the Securities Commission of The Bahamas (SCB) from FTX DM, as well as the decision to let local residents withdraw $100 million after the Delaware court froze all FTX assets.
Not So Merry
The question of who owns the 7.6% of Robinhood stock that indicted FTX founder Bankman-Fried purchased, reportedly in hopes of acquiring the stock-and-crypto exchange platform, was already complex. Bankrupt crypto lender BlockFi has laid claim to the shares, which were used as collateral for a $600 million loan it made to Alameda Research, the Bankman-Fried-owned firm whose massive trading losses were behind the exchange's collapse.
In addition, Bahamian liquidators working for the SCB have laid claim to them, as has the current leadership of the FTX Group overseeing the estate of Bankman-Fried's empire, including FTX, FTX US, Alameda and some 100 smaller companies formed for a variety of purposes.
One of those, Emergent, was created by Bankman-Fried and Wang to borrow $456 million from Alameda for the purpose of buying the Robinhood shares.
"The seizures that have taken place were ordered by the court in connection with the criminal actions in the Southern District of New York with respect to Mr. Bankman, Miss Ellison and Mr. Wang," FTX lawyer James Bromley said on Wednesday.
While reserving the company's rights with respect to the seized assets, Bromley told the court it wanted to be clear that the Robinhood shares in question "were being seized from accounts that are not currently under the control of the debtors."
