Sam Bankman-Fried borrowed $546 million from his hedge fund to buy a stake in Robinhood – CNN

Sam Bankman-Fried borrowed $546 million from his hedge fund to buy a stake in Robinhood - CNN


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CNN

When Sam Bankman-Fried bought a nearly 7.6% stake in popular stock trading app Robinhood earlier this year, he funded the deal with more than half a billion dollars borrowed from his own hedge fund — the entity prosecutors say was illegally transfer money from customers from its affiliate platform, FTX.

In an affidavit released Tuesday, Bankman-Fried said he and FTX are co-founders Garry Wang borrowed more than $546 million from the hedge fund, Alameda Research, which they used to buy the Robinhood shares through a holding company primarily controlled by Bankman-Fried.

Wang has since pleaded guilty to four counts of fraud and conspiracy, working with US prosecutors investigating the collapse of FTX. Bankman-Fried has been charged with eight felonies. Since stepping down from FTX, he has repeatedly denied knowingly committing fraud; his arraignment date has not yet been set. He was arrested earlier this month in the Bahamas, where FTX is based, and extradited to the US last week. He is under house arrest at his parents’ home in California, and if found guilty could face life in prison.

Bankman-Fried’s stake in Robinhood is now at the center of a separate, multi-national legal battle over the assets associated with the bankrupt FTX crypto empire.

Four separate entities have claimed the approximately 56 million shares, worth approximately $450 million. The new management of FTX, which is trying to recover money for investors and customers of the bankrupt platform, wants to wrest control of the shares from the Antigua-based holding company that is 90% owned by Bankman-Fried.

Bankman-Fried claims ownership of the shares himself, seeking a source of payment for legal fees, according to FTX. Also, the Robinhood stock claims to be bankrupt crypto lender BlockFi and an individual FTX creditor.

Because the competing claims, FTX filed a motion earlier this month to Delaware Bankruptcy Court to keep the assets frozen until the court “can resolve the issues in a manner that is fair to all debtors’ creditors.”

It’s not clear from the court documents whether the $546 million used to buy the stake included funds that prosecutors allege were stolen from customer deposits held in FTX.

BlockFi, a prominent crypto lender, halted withdrawals when FTX unraveled, citing significant exposure to the trading platform. It filed for bankruptcy on Nov. 28, just over two weeks after FTX, Alameda and dozens of affiliates went under.

BlockFi is suing Bankman-Fried for the Robinhood shares, which BlockFi claims it owes after Alameda defaulted on $680 million in collateralized loan obligations.

Earlier this month, Robinhood CEO Vlad Tenev said told CNBC that he is “not surprised” that the stake is one of the more valuable assets on FTX’s books because it is a public company.

“We don’t have much information that you don’t. We’re just watching this unfold and… it’s probably going to be stuck in bankruptcy proceedings for a while.

Meanwhile, the recent implosion of cryptocurrencies has been disastrous for Robinhood. The company has been fired 23% of the workforce in August after shedding 9% of its employees in April. The stock of the online brokerage has arrived free fall as trade has dried up.

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