Bankrupt cryptocurrency lender BlockFi is suing Sam Bankman-Fried to grab shares in Robinhood that the FTX founder allegedly pledged as collateral simply days earlier than his trade collapsed.
The lawsuit on Monday got here simply hours after BlockFi filed for bankruptcy protection having suffered “a extreme liquidity crunch” triggered by the failure of Bankman-Fried’s FTX trade.
BlockFi’s complaint, which was filed in the identical New Jersey court docket the place it initiated chapter proceedings, focused Bankman-Fried’s Emergent Constancy Applied sciences automobile and demanded it flip over unspecified collateral.
The collateral at challenge is Bankman-Fried’s stake in Robinhood, the web buying and selling firm, in response to mortgage paperwork seen by the Monetary Instances. He purchased 7.6 per cent of Robinhood earlier this yr.
The dispute underscores the shut hyperlinks between crypto ventures and the messy untangling course of that’s starting as chapter legal professionals sift via the wreckage of FTX and different companies hit by its collapse.
The trade has suffered a collection of rippling insolvencies this yr as a serious disaster in confidence has swept crypto markets, driving down tokens equivalent to bitcoin and ethereum to their lowest worth since 2020.
Bankman-Fried had styled himself as a saviour for failing crypto ventures in June and had supplied emergency financing for BlockFi that gave him an choice to purchase the lender at a fire-sale worth.
However on Monday BlockFi mentioned its publicity to Bankman-Fried was in the end its downfall, noting that his Alameda Analysis buying and selling agency had defaulted on $680mn of collateralised loans in early November.
BlockFi’s grievance claims that across the similar time, on November 9, it and Emergent entered into an settlement to ensure the fee obligations of an unnamed borrower by pledging sure “widespread inventory” as safety. Authorized correspondence included within the case establish the borrower as Alameda.
The dispute is an indication of the extraordinary strain on Bankman-Fried, whose paper fortune vanished virtually in a single day with the collapse of his $32bn FTX empire. Authorities within the US and the Bahamas, the place FTX was headquartered, have launched investigations.
Within the days main as much as FTX’s chapter submitting on November 11, Bankman-Fried had been dashing to lift billions of {dollars} in recent financing. Spreadsheets he shared with buyers listed his Robinhood shares as an asset.
Earlier in November, the FT reported that Bankman-Fried had been privately trying to promote the Robinhood shares utilizing the safe messaging app Sign within the days main as much as FTX’s chapter submitting on November 11.
Bankman-Fried had continued to barter promoting his Robinhood shares even after getting into into the pledge settlement, in response to two individuals acquainted with the matter.
In response to messages seen by the FT, Bankman-Fried was nonetheless negotiating these gross sales on the night of November 10.
BlockFi additionally named ED&F Man Capital Markets within the lawsuit as Emergent’s dealer, claiming the London-based brokerage had “refused to switch the Collateral to BlockFi”.
Authorized correspondence filed together with the grievance exhibits that ED&F Man had declined to switch the belongings “absent an order from the Chapter Courtroom” within the FTX proceedings in Delaware.
BlockFi and Bankman-Fried didn’t instantly return requests for remark. ED&F Man declined to remark past the correspondence included within the filings.
