U.S. Government Seizes Robinhood Shares Linked to FTX Founder Sam Bankman-Fried

The U.S. Department of Justice (DOJ) is seizing Robinhood stock worth about $460 million that is tied to former FTX CEO Sam Bankman-Fried (SBF). “We believe that these assets are not the property of the bankruptcy estate or fall within the exceptions … of the bankruptcy code” a DOJ attorney told the judge overseeing FTX’s bankruptcy case.

DOJ seizes Robinhood’s FTX-related actions

The U.S. government is seizing 56 million shares of Robinhood Markets stock, worth about $460 million, that are linked to FTX founder Sam Bankman-Fried (SBF), Seth Shapiro, a lawyer for the U.S. Department of Justice (DOJ), said at an FTX bankruptcy court hearing in Delaware Wednesday.

Shapiro told Judge John Dorsey, who is overseeing the FTX bankruptcy case:

We believe that these assets are not the property of the bankruptcy estate or that they fall within the exceptions … of the bankruptcy code.

According to Robinhood’s filing with the Securities and Exchange Commission (SEC) in May of last year, Emergent Fidelity Technologies took control of the company a 7.6% stake in Robinhood, and Bankman-Fried was the sole director and majority owner.

Following FTX’s bankruptcy filing, ownership of Robinhood’s shares is being contested by FTX’s new management, Bankman-Fried, an individual creditor of FTX and crypto-currency lender Blockfi, which also filed for bankruptcy last November.

Because of the multiple parties claiming the Robinhood shares, FTX’s new management has filed a motion with the Delaware bankruptcy court to keep the assets frozen until the court “can resolve the issues in a manner that is fair to all of the debtors’ creditors.”

FTX attorney James Bromley said at Wednesday’s hearing, “The question of ownership of these Robinhood shares was an open question before the seizure took place.“He added:

We certainly believe that we have rights with respect to these assets … We are in alignment right now with the U.S. government and law enforcement officials in taking these actions.

James Bromley pointed out that the Robinhood shares seized by federal prosecutors are from accounts that are not currently under the direct control of the bankrupt FTX company.

The DOJ and multiple U.S. regulators, including the SEC, have charged Bankman-Fried with several counts of fraud. However, the former FTX CEO has pleaded not guilty to all charges.