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The US Department of Justice has retained control of the contested 56 million shares of Robinhood, a popular financial trading app, worth approximately $500 million.
In a January 6 court filing, the DOJ notified the court handling the bankruptcy of BlockFi that it has seized 55,273,469 shares of Robinhood, worth more than $450 million at the time of publication. The shares had been held at an account at brokerage firm ED&F Man.
The “seized Assets constitute property involved in violations” of money laundering and could have been proceeds of violations of wire fraud, the DOJ said.
The shares are owned by Sam Bankman-Fried and FTX co-founder Gary Wang through a holding company called Emergent Fidelity Technologies and were purchased with a loan from his own hedge fund, Alameda Research.
Last week, Bankman-Fried, the disgraced founder of crypto exchange FTX, filed a court action asking to block debtors from taking control of the shares.
The move came after four entities laid claim to the shares. Bankrupt crypto lender BlockFi, an FTX creditor, FTX’s new management, which is trying to claw back funds for investors and customers of the bankrupt platform, as well as the US government wanted to keep a grasp of the shares.
In the filing, SBF’s lawyers argued that the shares are owned by a holding that is not an FTX-related entity. “The FTX Debtors seek to disregard the separate existence of a corporation that is not a party to this action and encumber hundreds of millions of dollars’ worth of assets to which they have no legal claim,” they said.
SBF’s lawyers also said the crypto boss needed the money to fund his legal expenses. The petition read:
“The balance of equities weighs in favor of refusing to enforce or extend the stay. Alienating this property from Emergent will render it inaccessible to Mr. Bankman-Fried, who is presently facing potential criminal liability. Mr. Bankman-Fried requires some of these funds to pay for his criminal defense.”
As reported, Bankman-Fried was arrested in The Bahamas in December last year after US prosecutors formally filed criminal charges against him. He was eventually extradited to the US where he was released from jail after posting a $250m bond in a New York court.
The Southern District of New York has charged SBF on eight criminal charges including wire fraud and conspiracy by misusing customer funds. Separately, the SEC has charged SBF with “orchestrating a scheme to defraud equity investors in FTX.”
“The charges in the Indictment arise from an alleged wide-ranging scheme by the defendant to misappropriate billions of dollars of customer funds deposited onto FTX, the international cryptocurrency exchange founded by Bankman-Fried,” the DOJ said in the court filing.
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