Sam Bankman-Fried took $546 million from his hedge fund to buy Robinhood shares

New York
CNN:
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When Sam Bankman-Fried bought a nearly 7.6% stake in Robinhood, the popular stock-trading app, earlier this year, he financed the deal with more than half a billion dollars he borrowed from his own hedge fund, which prosecutors say was illegal. draining customer funds from its affiliate platform, FTX.

In an affidavit released Tuesday, Bankman-Fried said she and FTX co-founder Gary Wang took more than $546 million from hedge fund Alameda Research, which they used to buy shares of Robinhood through a holding company they mostly control. by Bankman-Fried. .

Wang has since pleaded guilty to four counts of wire fraud and conspiracy to cooperate with U.S. prosecutors investigating the collapse of FTX. Bankman-Fried was charged with eight criminal counts.

After leaving FTX, he has repeatedly denied knowingly committing fraud. his sentencing date has not been set. He was arrested earlier this month in the Bahamas, where FTX is based, and extradited to the US last week. He is under house arrest at his parents’ home in California and is due to appear in federal court in Manhattan on January 3. If convicted, he could face life in prison.

Bankman-Fried’s stake in Robinhood is now at the center of a separate, multinational legal battle over assets linked to FTX’s bankrupt crypto empire.

Four separate entities claimed about 56 million shares worth about $450 million. FTX’s new management, which is trying to recoup funds for investors and clients of the bankrupt platform, wants to strip control of the shares to the Antigua-based holding company, which is 90% owned by Bankman-Fried.

Bankman-Fried itself is claiming ownership of the stock, seeking a source of legal fees, FTX reports. Robinhood shares are also being claimed by bankrupt crypto lender BlockFi and individual creditor FTX.

Because of the competing claims, FTX filed a motion in Delaware bankruptcy court earlier this month to keep the assets frozen until the court “can resolve the issues in a manner that is fair to all of the debtor’s creditors.”

It’s unclear from court documents whether the $546 million used to buy the shares included funds that prosecutors allege were stolen from customer deposits at FTX.

BlockFi, a prominent crypto-lender organization, halted withdrawals after FTX was exposed, citing significant exposure on the trading platform. It filed for bankruptcy on Nov. 28, just two weeks after FTX, Alameda and dozens of subsidiaries went under.

BlockFi is suing Bankman-Fried for shares in Robinhood that BlockFi claims it is owed after Alameda defaulted on $680 million in collateralized loan obligations.

Earlier this month, Robinhood CEO Vlad Tenev told CNBC that he was “not surprised” that the stake is one of the most valuable assets on FTX’s books because it is a public company.

“We don’t have much information that you don’t have. We’re just watching how it plays out and … it’s going to be closed in the bankruptcy process, probably for a while.”

Meanwhile, the recent cryptocurrency boom has been disastrous for Robinhood. The company laid off 23% of its workforce in August after cutting 9% of its workforce in April. Online brokerage stocks were in free fall as trading dried up.