BlockFi Looks to Dismiss Bankruptcy Case for SBF’s Robinhood Shell Company

Emergent Fidelity’s case is "futile," says the bankrupt crypto lender seeking access to its 55 million Robinhood shares.

AccessTimeIconFeb 17, 2023 at 7:21 a.m. UTC
Updated Feb 17, 2023 at 4:22 p.m. UTC

Bankrupt crypto lender BlockFi on Thursday moved to strike out the bankruptcy case of Emergent Fidelity Technologies, as a battle over around $600 million in assets mainly owned by FTX founder Sam Bankman-Fried becomes ever more complex.

Emergent, an Antiguan shell company 90% owned by Bankman-Fried, owns 56 million shares of online broker Robinhood Markets (HOOD) plus some cash, and apparently little else.

Those assets are now the subject of a legal tussle involving FTX, BlockFi, the Department of Justice and the Robinhood Board. BlockFi believes Emergent’s Antiguan liquidators are making it even more complex by filing for Chapter 11 bankruptcy protection in the U.S.

“Neither law nor equity require the doing of a futile act. But this bankruptcy case asks the Court to do just that – to ‘reorganize’ an empty shell,” BlockFi’s filing said.

The bankruptcy filing, made Feb. 3, was not made in good faith; the company isn’t eligible, having no employees, no income and no business; and the case exists “solely” to advance the interests of Antiguan liquidators who’ve already gained over $1.7 million in fees, BlockFi said.

BlockFi has taken legal action to secure access to the shares, which it says were security for a loan made Nov. 9. The Department of Justice seized the assets in January as it investigates fraud charges against Sam Bankman-Fried and Gary Wang, who owns the remaining 10% of Emergent. Bankman-Fried has pleaded not guilty while Wang has entered a plea deal.

Toni Shukla, one of the liquidators of Emergent appointed in Antigua, told CoinDesk her duties were to Emergent's creditors, even if there are competing claims as to who those creditors might be.

"Chapter 11 protection is the only practical way to empower the debtor to defend itself, the assets and its creditors’ interests in the U.S.," Shukla said, repeating "serious concerns" made in earlier filings over the legitimacy of BlockFi's claim to the shares.

UPDATE (Feb. 17, 16:04 UTC): Adds comment from Emergent's Toni Shukla in last two paragraphs.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.