BlockFi Sues FTX’s Sam Bankman-Fried For Selling Robinhood Share Collateral

BlockFi Sues FTX's Sam Bankman-Fried For Selling Robinhood Share Collateral
BlockFi Sues FTX’s Sam Bankman-Fried For Selling Robinhood Share Collateral

Lucknow(Coinchapter.com): Sam Bankman-Fried’s fall from grace has become a major point of discussion.

The founder of what was once the world’s third-largest crypto exchange by volume, FTX, was a household name within the crypto community. However, the fabled investor could now face criminal charges for potential legal violations related to FTX’s collapse.

But it doesn’t stop there. News reports now emerge that trading platform BlockFi has sued SBF for attempting to offload shares held in Robinhood.

Source: Twitter

BlockFi, a crypto exchange with ties to FTX, sued Sam Bankman-Fried to seize shares in Robinhood that he allegedly pledged as collateral before FTX’s collapse, reported Financial Times on November 29. The lawsuit was made before BlockFi filed for Chapter 11 bankruptcy protection.

The collateral in question specifically pertains to SBF’s shares held in the popular trading platform Robinhood. BlockFi claims that SBF had promised these shares as collateral after FTX entered into a loan agreement with the former exchange. 

However, following a cash crunch at FTX, SBF allegedly attempted to raise fresh funds by selling these shares.

FT reported that spreadsheets shared with investors listed his Robinhood shares as assets. Other reports also claim that Bankman-Fried attempted to sell his Robinhood stake using the secure messaging app Signal.

BlockFi’s demand to hand over the specified shares comes amidst reports that broker ED&F Man Capital Markets, representing SBF, had denied transferring the collateral to BlockFi.

Sam Bankman’s ties to BlockFi

Once the king of a $32 billion empire, Sam Bankman-Fried’s reputation has come under scrutiny following revelations of FTX collapse. Reports claim that SBF used the exchange’s native token, FTT, as collateral for loans given to sister firm Alameda Research, which led to their ultimate demise.

Several class action lawsuits have been filed by FTX clients, calling the exchange a ‘Pozni scheme’ after the exchange could not return customer funds.

A domino effect ensued following FTX’s crash, leading to many other crypto projects’ bankruptcies. Among those was BlockFi, which hurried to restructure its firm following its exposure to the FTX contagion.

The company added that it currently held only $256.9 million cash on hand, which would provide liquidity on its platform.

Source: Twitter

But this isn’t the only dealings BlockFi has had with SBF. Earlier, the struggling exchange offered SBF a discounted price for a potential takeover. Bloomberg had even reported that FTX was preparing an offer for BlockFi, which SBF later denied.

Speaking on the rumors, Bradley Duke, Founder & co-CEO at ETC Group, a firm invested in Metaverse and Blockchain ETFs, said:

“It is unfortunate for BlockFi that the white knight that had offered them a lifeline back in June hasn’t managed to stay solvent themselves, partly because of the massive losses accumulated at Alameda Research stemming from the same event – the collapse of Terra Luna and Three Arrow Capital.”

He also added that it would probably still be in business if a responsible and experienced management team ran FTX with the requisite transparency, capital adequacy, asset segregation, and operational controls.

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Sam Bankman-Fried, BlockFi Sues FTX’s Sam Bankman-Fried For Selling Robinhood Share Collateral

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