Skip to content

BlockFi Moves Court to Cancel Protection of SBF's Foreign Investments

BlockFi suggested that the possibility of Emergent Fidelity filing for bankruptcy may undercut its claims for Robinhood share ownership.

Image Credit: Bloomberg (1)

BlockFi has submitted a petition to the United States Bankruptcy Court in Wilmington, Delaware, to have the bankruptcy protections granted to an SBF offshore investment vehicle removed.

The failing cryptocurrency lender requested a judgment from the court to dismiss SBF's appeal for Emergent Fidelity Technologies Ltd. one week ago.

According (1) toBlockFi, the designation of the offshore investment scheme as insolvent could be more practical. Instead, the distressed digital asset lender suggested that the possibility of Emergent Fidelity filing for bankruptcy may undercut its claims for Robinhood share ownership.

It is important to remember that SBF purchased a 7.6% investment in Robinhood through Emergent Fidelity between April and May of the previous year. To complete the acquisition at the time, the discredited individual who had previously served as CEO of FTX paid out $648 million that had been borrowed from Alameda Research.

Despite assertions made by BlockFi that Emergent Fidelity's Chapter 11 bankruptcy status was pointless, an involved liquidator believes this is not the case.  A representative from Emergent liquidator, Toni Shukla, who works for the financial adviser Quantuma stated that the bankruptcy file's purpose is to defend all creditors' rights.

Shukla explained the matter in her affidavit, stating that Emergent holds no meaningful assets other than shares. In addition, the director of Quantuma stated that prosecutors successfully seized almost $20 million in cash formerly held by the offshore investment scheme.

Consequently, she characterized the BlockFi motion against the SBF appeal and Emergent Fidelity as lacking foundation. According to Shukla, the assertion made by BlockFi that fees were the driving force behind the bankruptcy case made by the SBF offshore entity needs to be corrected.

Previously, BlockFi had asserted a claim to the Robinhood shares by using them as security for a loan of $600 million to the trading firm Alameda. But, the new insolvency management team for FTX and Alameda has also claimed an interest in Emergent's Fidelity's assets, which the government currently owns.

As part of a pledge arrangement, Emergent Fidelity had provided BlockFi with the HOOD shares as collateral by pledging them to BlockFi. Caroline Ellison, who had previously served as chief executive officer of Alameda, inked the agreement just a few days before the FTX market crashed in November.

In conjunction with the upcoming criminal prosecution against Bankman-Fried, the attorneys for the United States government took custody of Emergent Fidelity's assets. SBF's legal team is also attempting to reclaim control of the investment business from its offshore liquidators.

On the other hand, Robinhood has previously indicated that it planned to repurchase Emergent shares. However, the organization that provides financial services said that it has yet to determine whether or not a buyback of this kind is conceivable at this time.

Expenses of Recovering Shares

After the appointment of the liquidators, Emergent Fidelity has racked up about $1.8 million in professional costs. According to documents filed with the court, these funds were used by Emergent to liquidate cases in several different jurisdictions while the company also sought fresh funding agreements.

To preserve and recover the shares, the SBF offshore investment platform collaborated with a fund managed by Fulcrum Capital Markets LLC. Per the terms of this agreement, Fulcrum would invest up to 2 million dollars, with returns of up to 3 times higher being anticipated.