Key Takeaways
- BlockFi accuses Emergent Fidelity Technologies Ltd of defaulting on its obligations under a November 9 pledge agreement.
- With the lawsuit, BlockFi seeks to recover shares in Robinhood Markets Inc pledged as collateral earlier this month.
Bankrupt crypto lending platform BlockFi has sued FTX former CEO Sam Bankman-Fried’s holding company Emergent Fidelity Technologies, seeking to recover shares in Robinhood Markets Inc pledged as collateral earlier this month.
The latest development comes hours after BlockFi revealed that it had filed for Chapter 11 bankruptcy protection along with eight other affiliates in a New Jersey court. The lawsuit against SBF’s company was filed on November 28 in the United States Bankruptcy Court for the District of New Jersey, the same court where BlockFi filed for bankruptcy.
As per the lawsuit, BlockFi accuses Emergent Fidelity Technologies Ltd of defaulting on its obligations under a November 9 pledge agreement. The November 9 pledge agreement saw Emergent agree to a payment schedule with BlockFi that it has allegedly failed to abide by.
According to court documents, Emergent guaranteed the repayment of obligations of Alameda Research Ltd, FTX’s sister trading firm. In the lawsuit, BlockFi has named the collateral as “including certain shares of common stock.” Reportedly, Bankman-Fried, trying to raise money before FTX’s collapse, was still trying to sell his Robinhood shares after entering into the collateral agreement with BlockFi.
Earlier this year, SBF acquired a 7.6% stake in the online brokerage firm Robinhood in May. The FTX founder bought approximately 56 million shares or $648m at the time of filing. The purchase was completed through his investment company titled Emergent Fidelity Technologies.
According to BlockFi’s bankruptcy filing, the company has assets between $1 billion and $10 billion, with liabilities in the same range and over 100,000 creditors. Its largest creditor is Ankura Trust Company, which now has a $730 million unsecured claim. West Realm Shires Inc., the legal name for FTX US, also has a $275 million unsecured claim.
BlockFi has had several hiccups in 2022. The company liquidated a large client and also needed a large line of credit from FTX to survive earlier this year. When FTX moved closer to bankruptcy, BlockFi attempted to execute margin calls and loan recalls on their Alameda exposure. However, Alameda defaulted on “approximately $680 million” of collateralized loans from BlockFi, eventually triggering BlockFi to file for bankruptcy.
