Justice in the Financial World

Justice in the Financial World

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  • Former FTX chief Sam Bankman-Fried borrowed hundreds of millions of dollars from Alameda Research to purchase his stake in trading app Robinhood Markets, according to court documents. In an affidavit provided to a Caribbean court before his arrest, Bankman-Fried said he and FTX co-founder Gary Wang together borrowed over $546 million from Alameda via promissory notes in April and May. They used that money to capitalize Emergent Fidelity Technologies Ltd., the shell corporation that in May bought a 7.6% stake of Robinhood.

  • The affidavit provides a new curveball in the three-way race to lay claim to the 56 million Robinhood shares. Crypto lender BlockFi, FTX Group and Bankman-Fried himself have all attempted to lay claim to the shares, which could be worth over $440 million. BlockFi, a prominent crypto lender, halted withdrawals as FTX came unraveled, citing significant exposure to the trading platform. It filed for bankruptcy on November 28, just over two weeks after FTX, Alameda and dozens of affiliates went under. BlockFi is suing Bankman-Fried for the Robinhood shares, which BlockFi claims it is owed after Alameda defaulted on $680 million in collateralized loan obligations.

Why it matters

Since stepping down from FTX, Bankman-Fried has repeatedly denied knowingly committing fraud. He was arrested earlier this month in the Bahamas, where FTX was based, and extradited to the US last week. He is under house arrest at his parents’ home in California, and scheduled to enter a plea in a federal court in Manhattan on January 3. Co-founder Gary Wang has already pleaded guilty to four counts of fraud and conspiracy, in cooperation with US prosecutors investigating FTX’s collapse. Bankman-Fried has been indicted on eight criminal counts.


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