The battle for SBF's $578 million worth of Robinhood shares takes a new twist

On November 28, crypto lender BlockFi filed for bankruptcy as a result of a contagion effect from the FTX collapse. On the same day, the firm also filed a suit against SBF over the Robinhood shares. According to the suit, BlockFi claims that Emergent Technologies entered a pledge agreement shortly before FTX filed for bankruptcy and provided the Robinhood Shares as collateral. And now, with BlockFi struggling with its own bankruptcy issues, it is looking to recover the alleged collateral as part of its restructuring efforts.

On December 22, 2022, FTX’s new boss and restructuring lawyer, John Ray III, filed a motion to freeze the Robinhood shares, especially with 4 different parties battling over them. "The asset should be frozen until this Court can resolve the issues in a manner that is fair to all creditors," said the court filing. Acting on this request, the U.S. Justice Department (DOJ), on Jan 4, declared that it had taken custody of the 55 million Robinhood shares.

However, the very next day, SBF filed a request to access the shares in order to pay for his criminal defence. The request goes on to state that any claims from others should be denied as they "have failed to carry their heavy burden of demonstrating that they are entitled to this form of relief." Therefore, not only was SBF requesting access to the shares, but he was also trying to restrict others from accessing them.

That’s right, on February 8, Robinhood’s board agreed to buy back the 55 million shares from Sam Bankman-Fried. "The board has authorized us to go and repurchase those

The move to buy back the shares could be due to Robinhood’s declining revenue as the crypto winter continues to take a roll on the firm. The brokerage firm’s crypto-related revenues dropped nearly 24 percent, falling from $48 million in Q3 of 2022 to $39 million in Q4. Overall, the firm's annual revenue also dipped from $1.81 billion in 2021 to $1.35 billion at the end of 2022. However, HOOD’s price jumped 3 percent following Robinhood's announcement to buy back its 55 million shares.

It’s hard to tell what will happen to FTX’s Robinhood shares. Customers of the fallen exchange may lean towards Robinhood buying back the shares as this would create revenue that can be used to make affected users whole again. However, court proceedings can take a lot of time to playout and can often deliver surprising results. Therefore, all we can do for now is wait and watch how things unfold in the coming months.