Bankrupt cryptocurrency exchange FTX has reached a settlement with Emergent Technologies, co-founded by Sam Bankman-Fried, over a dispute concerning more than $600 million worth of Robinhood shares. According to a court filing, FTX will pay Emergent $14 million to cover administrative expenses related to the withdrawal of its claim over the 55 million shares and associated cash.
The agreement, filed by FTX CEO John Ray III in a Delaware Bankruptcy Court, is designed to recover additional funds for FTX’s creditors while avoiding costly and lengthy litigation. It is also expected to expedite Emergent’s bankruptcy proceedings in Antigua. Ray emphasized that the settlement was the result of “good faith, arm’s length negotiations,” ensuring transparency and no collusion between the parties.
Robinhood Shares Acquired by Emergent in 2022
Emergent Technologies acquired 56 million Robinhood shares in May 2022, valued at approximately $600 million, through a partnership with Bankman-Fried and Alameda Research. Ownership of the shares became contentious after FTX’s collapse in November 2022, with multiple entities, including BlockFi and Emergent, staking claims. In January 2023, the U.S. Department of Justice seized the shares, linking them to alleged violations of money laundering and wire fraud. Robinhood repurchased the seized shares in September 2023 for $606 million.
Emergent filed for Chapter 11 bankruptcy in February 2023, and the current settlement is expected to conclude the company’s case. A hearing regarding the settlement is scheduled for October 22.
SEC May Challenge FTX’s Stablecoin-Based Repayment Plan
Meanwhile, the U.S. Securities and Exchange Commission (SEC) has signaled that it may challenge FTX’s repayment plan if it involves returning funds to creditors in stablecoins. Although the SEC hasn’t declared stablecoin repayments outright illegal, it reserves the right to object if they involve US-dollar-pegged crypto assets.
FTX is exploring various strategies to repay creditors, including a proposal to liquidate assets and settle claims based on the value of those assets at the time of the exchange’s bankruptcy. Creditors would be repaid in cash or stablecoins under this plan. FTX had previously shelved a plan to revive the exchange.
The SEC’s regulatory stance has faced mounting criticism, with detractors arguing that the agency relies too heavily on enforcement actions rather than establishing clear guidelines for the crypto industry. Recently, a coalition of seven U.S. states united to challenge the SEC’s regulatory approach to cryptocurrency.
