FTX, the bankrupt cryptocurrency exchange, has recently settled a dispute over more than $600 million worth of Robinhood shares with Emergent Technologies. The agreement entails FTX paying Emergent $14 million to cover administrative expenses linked to the withdrawal of its petition for 55 million Robinhood shares and cash, as per a recent court filing by FTX CEO John Ray III in a Delaware Bankruptcy Court. This settlement is anticipated to aid in recovering funds for FTX’s creditors and circumventing the costs of protracted litigation.
The deal is also poised to assist Emergent in swiftly wrapping up its bankruptcy proceedings in Antigua. Ray affirmed in a declaration supporting the settlement that the agreement resulted from “good faith arm’s length negotiations,” ensuring transparency and ruling out any collusion between the parties involved.
Emergent Acquired 56M Robinhood Shares in 2022
Back in May 2022, Emergent secured roughly 56 million Robinhood shares valued at around $600 million through an arrangement with Bankman-Fried and Alameda Research, the trading firm he established. The ownership of these shares has been debated by various parties such as FTX, BlockFi, Bankman-Fried, and Emergent.
The U.S. Department of Justice seized the Robinhood shares in January 2023 following FTX’s collapse in November 2022. Robinhood repurchased the shares for approximately $606 million on September 1, 2023. The DOJ cited that the seized assets were linked to violations of money laundering and potential wire fraud infractions.
Emergent filed for Chapter 11 bankruptcy in February 2023 and is anticipated to conclude its case following the recent settlement. A hearing regarding this motion is slated for October 22.
SEC Could Challenge FTX’s Stablecoin-Denominated Repayments Plan
Recently, the SEC issued a warning indicating that it may contest FTX’s repayment plan if it involves reimbursing funds to creditors using stablecoins. The agency’s legal team signaled that while repaying creditors with stablecoins might not be explicitly illegal, the SEC reserves the right to challenge such repayments, especially if they involve US-dollar pegged crypto assets.
FTX has explored several avenues to compensate creditors, including a shelved plan to revive the exchange. The latest proposal from FTX suggests liquidating assets and settling claims based on the U.S. dollar value of those assets at the time of the exchange's insolvency. Creditors would receive repayments in cash or stablecoins under this proposed plan.
Meanwhile, the SEC has faced mounting criticism for its approach of “regulation-by-enforcement” within the crypto industry. Critics contend that the SEC has not established a clear regulatory framework for cryptocurrencies, choosing instead to pursue legal actions against significant industry participants.
A group of seven U.S. states has united to challenge the SEC’s regulation of cryptocurrency, underscoring the ongoing tensions and uncertainties surrounding crypto regulations in the United States.
