FTX Reclaims $600M in Robinhood Shares in Key Bankruptcy Settlement

FTX has reached a deal to regain control of Robinhood shares worth over $600 million, surprising many in the crypto community. At the same time, Robinhood will repurchase Sam Bankman-Fried’s (SBF) stake for $605.7 million from the U.S. Marshal Service. These shares were seized and held by the government after FTX’s bankruptcy last year.

To finalize this deal, FTX will pay $14 million to Emergent Fidelity Technologies, a company connected to SBF, to cover administrative costs. In return, Emergent will drop its claim on the 55 million Robinhood shares, which helps FTX recover funds for its creditors.

Settlement Details

Interestingly, this settlement will help FTX clear a big legal hurdle in its bankruptcy case. Notably, Emergent had the shares since May 2022, but after FTX’s collapse in November 2022, the shares became disputed. The U.S. Department of Justice seized them in January 2023, and Robinhood bought them back in September 2023.

This agreement helps FTX move forward in its bankruptcy process and allows Emergent to speed up its bankruptcy case in Antigua. A court hearing to finalize the deal is set for October 22, 2023, which could hasten the resolution for both FTX and Emergent.

FTX Recovery Efforts

Once valued at $32 billion, FTX has faced numerous legal issues since its downfall. The exchange’s financial mismanagement and fraud allegations led to its Chapter 11 bankruptcy filing. In August, FTX was ordered to pay $12.7 billion, the largest recovery ever by the CFTC. This settlement with Emergent is a crucial part of FTX’s efforts to recover and return value to its creditors.

Will SEC Pose a Challenge?

Meanwhile, FTX’s plan to repay creditors using stablecoins, particularly those pegged to the US dollar, might face scrutiny from the SEC. While this approach isn’t illegal, the SEC could challenge it, given its unclear stance on crypto regulations. FTX is considering paying creditors in cash or stablecoins based on asset values at the time of its bankruptcy.

Additionally, the SEC is facing criticism from a coalition of seven U.S. states for its handling of cryptocurrency issues.

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Is this a victory for FTX, or a setback for creditors?