US Department of Justice seizes Robinhood shares from Sam Bankman-Fried – This is how Robinhood wants to proceed

• Bankman-Fried and Wang bought Robinhood stock through Emergent Fidelity Technologies in May 2022
• US Department of Justice seized Bankman-Fried’s Robinhood shares
• Robinhood plans share buyback – enough cash reserves are available

FTX and Robinhood were considered the rising stars on the financial market par excellence in 2020 and 2021: FTX for the cryptocurrencies and Robinhood for stocks, especially for the meme papers à la GameStop or AMC Entertainment. However, 2022 was very weak for Robinhood and even worse for the crypto exchange FTX, which had to file for bankruptcy in November 2022. Particularly spicy: The two FTX founders bought a seven percent stake in Robinhood.

Advertising

Trade Cardano and other cryptos with leverage via CFD (long and short)

Cardano and other cryptocurrencies have recently corrected significantly. Trade cryptos like Bitcoin or Ethereum with leverage at Plus500 and participate in rising and falling prices.

Plus500: Please note the Hints5 to this advertisement.

Before FTX bankruptcy: Bankman-Fried and Wang took over seven percent of Robinhood

Just a few months before the FTX bankruptcy, in May 2022, Bankman-Fried and Wang bought an extremely lavish block of shares from the US broker Robinhood through their joint investment vehicle Emergent Fidelity Technologies. According to the SEC filing of January 20, 2023, Emergent Fidelity Technologies holds exactly 55,273,469 shares, which at the current level of the Robinhood shares, which have recently recovered somewhat, are US$ 9.92 per share (as of the closing price on February 21, 2023). totaling $548.3 million. This block of shares corresponds to seven percent of the entire company. However, investment holding company Emergent Fidelity, which was 90 percent owned by Bankman-Fried and 10 percent by Wang, filed for bankruptcy protection in January.

Ownership of Robinhood shares currently unclear

As part of the legal process against the insolvent crypto exchange FTX, the US Department of Justice seized the outstanding assets of Sam Bankman-Fried at the end of January. The Robinhood holding provided the lion’s share of the confiscated assets, which totaled $700 million. Ownership of these shares has since been disputed as the Bankman-Fried fraud case continues to unfold. Emergent Fidelity, co-founded by FTX founders Bankman-Fried and Wang, bought the shares but pledged them as collateral for a loan from crypto lender BlockFi. Lender BlockFi, which also filed for bankruptcy last year, has since claimed the value of the shares. However, the crypto exchange FTX also claimed to own the shares as part of the bankruptcy proceedings. Also, to complicate things further, Bankman-Fried has personally claimed the Robinhood stock package in his own ongoing legal affairs. The legal situation is therefore unclear – the US Department of Justice has yet to decide whether the block of shares belongs to BlockFi, FTX or Bankman-Fried.

Robinhood Board Announces Share Buyback

Regardless of legally proven ownership of the shares, Robinhood intends to buy back the package. The Robinhood board of directors has approved the buyback plan, as the company emphasized when it presented its last quarterly figures. During the analyst conference call, Robinhood CEO Vlad Tenev said, “We believe this buyback will add value over time and remove a distraction for shareholders,” CoinDesk quoted him as saying. Tenev pointed out that Robinhood’s balance sheet, with a cash cushion of over $6 billion, is large enough to complete the share buyback without financial difficulties. Tenev added that due to the unusual legal situation, he cannot predict how long the share buyback will take. Robinhood will keep its investors updated on the progress. As with typical stock repurchase programs, investors can expect Tenev’s plans to have a positive impact on the price of Robinhood’s stock as the repurchase will reduce the supply of outstanding shares. In addition, the CEO’s plan signals confidence in a good future for the neo-broker.

The date of the buyback has not yet been determined

Robinhood’s chief financial officer, Jason Warnick, was also satisfied with the development. “Our board has authorized us to purchase the shares of Robinhood that were originally acquired by Emergent Fidelity Technologies, the FTX subsidiary,” the CFO told CNBC. “And that was a big question for shareholders and a technical hangover as to what’s going to happen to these stocks,” Warnick said. Robinhood is currently in talks with the US Department of Justice about further proceedings. At the moment, however, it is very difficult to predict whether and if so when Robinhood can buy back the former FTX stake.

Editorial office finanzen.net

Selected leveraged products on RobinhoodWith knock-outs, speculative investors can participate disproportionately in price movements. Simply select the desired lever and we will show you suitable open-end products on Robinhood

Leverage must be between 2 and 20

No data

Image sources: OpturaDesign / Shutterstock.com, T. Schneider / Shutterstock.com

ttn-28