The Blubber

Per FT

Sam Bankman-Fried, the founder of FTX, is being sued by BlockFi over allegedly pledged Robinhood shares as collateral. The lawsuit comes after the crypto company seeks bankruptcy protection.

The lawsuit alleges that SBF pledged his Robinhood shares as collateral just days before FTX collapsed and came just hours after BlockFi filed for bankruptcy protection.  The filing resulted from a "severe liquidity crunch" triggered by the FTX failure.

The lawsuit demanded that SBF's Emergent Fidelity Technologies vehicle should turn over unspecified collateral. According to loan documents seen by FT, the FTX founder bought a 7.6% stake in Robinhood in early 2022.

SBF's Emergent investment company purchased the 7.6% stake in Robinhood for $648 million. BlockFi said it has over 100,000 creditors, assets between $1 billion and $10 billion, and liabilities within the same range, as per Coin Telegraph.

SBF was previously thought of as a savior of crypto companies as he provided emergency financing for BlockFi in June, giving him the option to purchase the lender at a specific price.

A few months before FTX's collapse, SBF's company offered to help Voyager and has so far deposited $5 million in "good faith" in an escrow account. In September, Voyager Digital accepted a bid from FTX worth $1.4 billion to acquire its distressed assets per Decrypt.

Since FTX has also collapsed, Voyager is not searching for a new buyer, with its legal team saying they were shocked, disgruntled, and dismayed by what happened.

BlockFi equates its downfall was due to its exposure to SBF, saying Alameda Research defaulted on $680 million worth of collateralized loans leading to the exchange's downfall.

As per BlockFi's complaint, they entered an agreement where there was "common stock" pledged as security. The case's legal correspondence identifies Alameda as the borrower.

As SBF was rushing to raise billions of dollars before he ultimately filed for bankruptcy on November 11, he shared spreadsheets with investors listing his Robinhood shares as an asset.

FT also reports that SBF was trying to sell his Robinhood shares on Signal privately, leading to the FTX bankruptcy filing on November 11. SBF tried to negotiate the sale of his Robinhood shares despite already entering the pledged agreement.

It was also revealed that SBF was trying to negotiate the sale of his shares up to the evening of November 10.  

References:

Financial Times

Coin Telegraph

Decrypt

See flow at unusualwhales.com/flow.