By George Ward
The popular online brokerage platform, Robinhood, has revealed a substantial $605.7 million agreement to repurchase shares once owned by the former FTX CEO, Sam Bankman-Fried. The embattled Bankman-Fried, a prominent figure in the cryptocurrency space, originally acquired these shares during his peak influence but later had them confiscated by the United States government.
Buying Back Bankman-Fried’s Stake
Robinhood’s official statement explained that these shares had previously belonged to Emergent Fidelity Technologies, another company belonging to the former CEO, but were seized and later transferred to the US government’s custody. This unexpected twist occurred following the bankruptcy proceedings of FTX and Emergent in November 2022.
The announcement further revealed that the US District Court for the Southern District of New York has formally consented to selling 55.3 million shares at $10.96 per share. Following this revelation, Robinhood’s stock price increased by more than 3% during the premarket trading session.
Sam Bankman-Fried, who was once a billionaire with an estimated net worth of $26 billion, rose to prominence as an influential political donor in the United States, capitalizing on the rise in popularity of digital assets such as Bitcoin. However, his fortune took a hit when his cryptocurrency exchange, FTX, went bankrupt, resulting in a total loss of his wealth.
The situation has become more complicated for the former crypto billionaire as he navigates several legal challenges, including an impending trial in October. Also, a US judge has ordered his detention before the trial, citing concerns about potential witness safety and tampering with the evidence.
This new development further complicates Robinhood’s decision to repurchase the shares previously held by Bankman-Fried’s firm.
How Bankman-Fried Purchased Robinhood Shares
The embattled former FTX CEO made headlines in May 2022 when he acquired a 7.6% stake in Robinhood. This move occurred at a time when his crypto exchange, FTX, was one of the prominent players in the digital asset services market.
Industry experts regarded the acquisition as a demonstration of Bankman-Fried’s financial muscle and influential presence in the digital finance sector. However, the subsequent failure of FTX and the legal issues he is facing have changed the narrative surrounding his investment ventures.
Extensive details about Bankman-Fried’s acquisition of Robinhood stakes were revealed in a legal affidavit submitted on December 27, 2022. Surprisingly, the report noted that these shares were obtained via loans provided by Alameda Research, a sister company to FTX.
Furthermore, the funds were moved through an unrelated company called Emergent Fidelity Technologies Ltd. This entity was also revealed to be co-founded by Bankman-Fried, the brain behind FTX, and Gary Wang.
The presence of this shell company in the transaction raised concerns about the real intentions behind this complex financial scheme involving the former FTX owner. Robinhood’s decision to explore a buyback option not only serves to free the company from legal issues affecting Bankman-Fried, but it also has the potential to increase its stock value significantly.
A side benefit is that Robinhood will reduce the number of outstanding shares available for trading by repurchasing these shares from the market. This decrease in supply can result in increased demand for the remaining stocks, driving up the company’s share price.