The seized assets constitute property involved in violations and could have been the earnings from wire fraud violations.
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The US Department of Justice has taken control of the contested 56 million shares of Robinhood, a renowned financial trading app with a market capitalization of around $500 million.
In a court filing dated January 6, the DOJ informed the court reviewing BlockFi's bankruptcy that it had seized 55,273,469 shares of Robinhood, which were worth more than $450 million at the time of writing. The shares were held in a brokerage account at ED&F Man.
According to the DOJ, the "seized assets constitute property involved in violations" and could have been the earnings from wire fraud violations.
The shares were acquired with a loan from his own hedge fund, Alameda Research, and are held by Sam Bankman-Fried and FTX co-founder Gary Wang through a holding company named Emergent Fidelity Technologies.
Bankman-Fried, the discredited founder of the crypto exchange FTX, filed a case last week, asking for a court order to prevent debtors from seizing possession of the shares.
The action was taken after four entities claimed ownership of the stock. BlockFi, a bankrupt crypto lender and an FTX creditor, the US government, and FTX's new management, which is seeking to recover funds for investors and customers of the bankrupt platform, all wanted to retain ownership of the shares.
SBF's lawyers stated in the filing that the shares are owned by a holding that is not affiliated with FTX. According to them, "The FTX Debtors seek to disregard the separate existence of a corporation that is not a party to this action and encumber hundreds of millions of dollars’ worth of assets to which they have no legal claim."
SBF's lawyers also stated that the funds were required to cover the crypto boss's legal expenses. According to the petition, "The balance of equities weighs in favor of refusing to enforce or extend the stay. Alienating this property from Emergent will render it inaccessible to Mr. Bankman-Fried, who is presently facing potential criminal liability. Mr. Bankman-Fried requires some of these funds to pay for his criminal defense."
In December of last year, after US prosecutors officially filed criminal charges against him, Bankman-Fried was arrested in the Bahamas, as was previously reported. In the end, he was returned to the US and released from prison after paying a $250 million bond in a New York court.
SBF has been charged with eight criminal counts in the Southern District of New York, including wire fraud and conspiracy to misappropriate customer funds. In a different case, the SEC accused SBF of "orchestrating a scheme to defraud equity investors in FTX."
In a court filing, the DOJ stated, "The charges in the indictment arise from an alleged wide-ranging scheme by the defendant to misappropriate billions of dollars of customer funds deposited onto FTX, the international cryptocurrency exchange founded by Bankman-Fried."
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