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BlockFi, a recently insolvent bitcoin lender, is suing former FTX CEO Sam Bankman-Fried in an effort to recover shares in Robinhood. They said that two days before FTX collapsed, SBF provided Robinhood shares as collateral.
BlockFi Sues SBF over Robinhood Shares
On November 28, 2022, BlockFi filed a complaint with the bankruptcy court in New Jersey. On November 9, 2022, Emergent Fidelity Technologies Ltd, an SBF subsidiary, allegedly violated a commitment agreement. This action was brought just hours after BlockFi asked for bankruptcy protection because to the severe liquidity issue that FTX was experiencing.
The SEC filing states that SBF first acquired 7.6% of the Robinhood stock. At the time, it was worth roughly $600 million. By providing some "common stock" as security, according to BlockFi and Emergent, they pledged to guarantee the borrower's obligation to pay back their debts. The legal records in the case name Alameda as the borrower.
BlockFi claims that SBF has broken its commitment agreement responsibilities. Furthermore, they added:
“failed to discharge its obligations thereunder notwithstanding formal notice of default and acceleration.”
The conditions of the Pledge Agreement are being implemented by BlockFi. They are attempting to recoup some of the collateral they provided for their now-insolvent business. But before they can completely recover their resources, they still have a long way to go. According to reports, their liabilities vary from $1 billion to $10 billion. Along with the SEC, BlockFi asserted that they owe money to over 100,000 other creditors.
Final Reflections
Actually, in addition to BlockFi, SBF also supported other companies throughout this weak market. Many more companies were approached by SBF and FTX. Many of them are looking for a new buyer in order to survive, including cryptocurrency lender Voyager. Many people are one decision away from filing for bankruptcy. Which company will experience a failure due to the FTX domino effect next?