American Robinhood Markets Inc. plans to buy back 55 million shares of its own company. FTX bought these shares in May 2022 through Emergent Fidelity Technologies, but the cryptocurrency exchange went bankrupt and the shares were confiscated.
In its latest earnings report, Robinhood Markets Inc. claims the shares are worth $550 million. The shares are the subject of a lawsuit in FTX’s bankruptcy proceedings.
The main players are FTX, BlockFi and Robinhood
The dispute has a number of important parties.
The first major party is FTX. We write about this a lot, but in case you missed it, this is a cryptocurrency exchange that went bankrupt at the end of 2022. Owner Sam Bankman-Fried has also founded several sister companies over the years, including Emergent Fidelity and Alameda Research. Emergent Fidelity borrowed $546 million from Alameda Research to buy shares of Robinhood.
FTX and Alameda Research went bankrupt in November 2022 after running out of funds to cover customer withdrawals. US prosecutors later charged Bankman-Fried with a long list of financial crimes, including securities fraud, money laundering and campaign finance violations.
Last week, sister company Emergent Fidelity filed for bankruptcy in the US Bankruptcy Court.
The second part is BlockFi. This American company is now also bankrupt, but in its heyday you could store cryptocurrency there and earn interest on it. You can also borrow money and/or crypto as collateral.
The latest is Robinhood Markets Inc., known for its Robinhood app. This is an American company that offers commission-free stock trading. The revenue model consists of interest on money deposited by users, sales of company data and market information and lending margin.
What’s the bet?
Robinhood’s earnings report proves why they want to buy back their own shares:
“The proposed share purchase reinforces the confidence that the Board of Directors and the management team have in our company.”
However, it is not certain who owns these shares. There are three parties claiming legal ownership of the shares. The first is, of course, Sam Bankman-Fried, the second is BlockFi, and the third is Yonathan ben Shimon, an FTX Lender. All three took legal action to gain control of the shares.
These shares are up 29.58% since January 1, 2023 and are worth more than $10. This makes it a simple calculation to determine the value of these 55 million shares.
In December 2022, FTX asked the court if the shares could be frozen. This application has been approved and the shares are currently held in a brokerage account with ED&F Man Capital Markets Inc. in New York, but are officially owned by the United States Department of Justice.
Robinhood shareholders want clarity
Robinhood says it is in talks with the DoJ to buy back the shares. Jason Warnick, CFO of Robinhood:
“That’s a big question in the minds of shareholders, what happens to these shares?”
“The board has authorized us to buy it back and so we are in talks with the Ministry of Justice. Hard to say exactly what the timeline will be,” Warnick added. Something similar can be read in Robinhood’s latest earnings report:
“Since there is little precedent for this type of situation, we cannot predict when or if the share purchase will take place. We will provide updates as needed.”
Worth knowing at the end of this article: In June 2022, there was still talk of FTX preparing a bid to acquire Robinhood.
Source: Btc Direct
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Barry Siefert is an accomplished journalist and author at The Nation View. He is known for his expertise in the field of cryptocurrency, and has written extensively on the topic. With a background in finance and economics, Barry has a deep understanding of the underlying technology and market forces that drive the crypto industry.
