FTX’s Strategic Move has stumbled millions of crypto investors as FTX has reached a sealed agreement to regain control of over $600 million worth of Robinhood shares. However, Robinhood has also announced it will buy back Sam Bankman-Fried’s (SBF) stake for $605.7 million from the U.S. Marshal Service. The shares were seized and transferred to government custody following FTX’s bankruptcy last year.
To initiate this, FTX will pay $14 million to Emergent Fidelity Technologies, a firm connected to SBF, to cover administrative costs. In exchange, Emergent will withdraw its claim on the 55 million Robinhood shares, aiding FTX’s efforts to 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.
Hence, the deal is a strategic move to resolve FTX’s bankruptcy efficiently, helping Emergent expedite its bankruptcy case in Antigua while avoiding further legal battles that could deplete available funds. A court hearing to finalize the agreement is scheduled for October 22, 2023, which could speed up the resolution process for both FTX and Emergent.
What Next?
FTX, which once boasted a $32 billion valuation, has faced numerous legal battles 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 in what is considered the largest recovery by the CFTC. This settlement with Emergent is a critical step in FTX’s ongoing efforts to recover and return value to its creditors.
In the meanwhile, the SEC might challenge FTX’s plan to repay creditors using stablecoins, especially if these are pegged to the US dollar. While not illegal, this approach could face scrutiny from the SEC. FTX is considering paying creditors in cash or stablecoins based on the value of assets at the time of its bankruptcy. The SEC, criticized for its unclear crypto regulations and enforcement actions, is also being contested by a coalition of seven U.S. states for its stance on cryptocurrency.
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