Who Owns 400 Million Robinhood Shares? BlockFi, FTX, and SBF Engage in Three-Way Battle

The cryptocurrency exchange FTX declared bankruptcy and has been undergoing reorganization for over a month since 11/11. Apart from continuing to take inventory of the remaining assets under FTX, the founder SBF claimed to hold 7.6% of Robinhood's shares, which has become a focal point of contention. BlockFi, FTX, and SBF all assert ownership of these shares, currently valued at approximately $440 million. Among them, an unfamiliar company, Emergent Fidelity Technologies Ltd., also emerged in court documents, revealing the intricate relationships through the legal proceedings.

What is Emergent?

Emergent Fidelity Technologies Ltd. is registered in the island nation of Antigua and Barbuda in Central America, with SBF as the sole director holding 90% of the shares, and the other FTX co-founder, Gary Wang, holding 10%.

According to a sworn affidavit provided by SBF to the Caribbean court before his arrest, he and Gary Wang borrowed a total of $546 million in April and May through promissory notes from Alameda, with $510 million borrowed in SBF's name and $35.18 million in Gary's name, at an annual interest rate of 2.21% for a 5-year term.

They used this money to capitalize Emergent and through this shell company, purchased 56,273,469 shares of Robinhood stock HOOD, representing 7.6% of Robinhood's shares. Therefore, SBF claims ownership of the Robinhood shares, which do not belong to FTX.

Note: A promissory note is a written promise guaranteeing the payment of a specified amount of money to a specific person or their designated person on a certain date or upon presentation of the note.

BlockFi Claims Ownership of Collateral

Cryptocurrency lending company BlockFi, which filed for bankruptcy at the end of November, also sued Emergent Fidelity Technologies Ltd., demanding the surrender of Robinhood stocks used as collateral for loans. In the complaint, BlockFi alleges that on November 9th, they signed a pledge agreement with Emergent, pledging certain "common stock" as collateral. In the pledge agreement, Emergent granted BlockFi an authorization, allowing BlockFi, as its true and lawful agent, to execute all necessary actions in Emergent's name or on its own behalf, if default occurs, to achieve the purpose of the pledge agreement.

In other words, BlockFi alleges that Emergent has violated the payment terms of the original agreement and has the right to sell the collateral to repay the loan. However, Emergent and the custodian of the collateral, EDFM, have both refused to surrender the collateral, leading BlockFi to request the court to enforce its rights.

How is the Stock Price Doing?

According to CNBC's chart, Robinhood's stock price has dropped from $10 per share when SBF entered in May to $7.95, with a current market value of about $440 million. Litigation is typically time-consuming, and until the outcome is determined, whether the stock price will rise, fall, or remain uncertain, all parties can only wait for the judge's ruling.