Sam Bankman-Fried is fighting to persuade a US court that he should be able to access Robinhood shares worth around $450 million to help pay for his legal fees. The problem: the Department of Justice - which does not believe the 56 million shares of Robinhood were property of the bankrupt FTX estate - moved on Wednesday to seize the shares. Another problem: both FTX and BlockFi are also laying claim to the shares as well. And while FTX’s creditors hope the shares can help make them whole, Bankman-Fried said he needs the funds to cover his legal fees.
Lawyers for the disgraced former CEO in a Delaware court filing on Thursday that the 56.3 million Robinhood shares should be returned to Bankman-Fried because the company that owns them, Emergent Fidelity Technology Ltd, is not part of the bankruptcy estate (at least not yet). Bankman-Fried owns 90% of Emergent. He and former FTX chief technology officer Gary Wang borrowed $546 million from Alameda Research (in other words used money stolen from FTX clients) to buy the Robinhood shares, according to court filings. Robinhood’s shares closed at $8.11 on Thursday, giving the stake a value of $456 million.
“Mr. Bankman-Fried has not been found criminally or civilly liable for fraud, and it is improper for the FTX Debtors to ask the Court to simply assume that everything Mr. Bankman-Fried ever touched is presumptively fraudulent,” his lawyers said in the filing. They added that Bankman-Fried’s need to pay his legal bills is greater than the “economic loss” that FTX faces, citing several legal precedents; we are confident that FTX clients would certainly beg to differ.
"Mr. Bankman-Fried requires some of these funds to pay for his criminal defense," the filing read, noting that the disgraced FTX founder is “facing potential criminal liability.” Bankman-Fried pleaded not guilty to all charges, including wire fraud and campaign finance violations, in New York Tuesday.
Bankman-Fried’s move is the latest in an ongoing ownership dispute over the shares. The equities, once worth more than $600 million, have plunged since they’ve been stuck in legal limbo.
On Thursday, court revealed that more than 56 million Robinhood shares are on the line, worth a little more than $450 million as of Friday’s prices. The shares belong to Emergent Fidelity Technologies, of which Bankman-Fried is the 90% stockholder, the filing added.
Representing Bankman-Fried in the bankruptcy proceedings is Gregory T. Donilon from Montgomery McCracken Walker & Rhoads LLP.
Bankman-Fried’s criminal lawyers are Cohen & Gresser’s Christian R. Everdell and Mark Stewart Cohen, who recently represented Ghislaine Maxwell in her sex trafficking case.
Bankman-Fried’s personal legal fees are not public, but Sullivan and Cromwell LLC, the firm leading FTX’s restructuring, accepted a $12 million retainer from the exchange before it filed for Chapter 11 on Nov. 11, 2022. As of Nov. 3, 2022, the firm had already cashed in more than $3.4 million of its retainer, nearly 30%.
