Online brokerage Robinhood announced on Wednesday that its board of directors had approved a buyback of the 7.6% stake in the company Sam Bankman-Fried, founder of the now-bankrupt cryptocurrency exchange FTX, had purchased in May 2022.
The shares are owned by an entity called Emergent Fidelity Technologies, a holding company Bankman-Fried and former FTX executive Gary Wong used to purchase a stake in the brokerage, and are currently worth more than $550 million. Emergent, which filed for bankruptcy last Friday, owns 55 million shares of Robinhood, per the board’s announcement.
“Since there is limited precedent for this type of situation, we cannot predict when, or if, the share purchase will take place,” Robinhood said in its fourth-quarter earnings press release. “We will provide updates as appropriate.”
The announcement from Robinhood potentially puts an end to a months long fight over who owns the significant stake in the online brokerage after FTX filed for bankruptcy in November 2022, as creditors try to claw back any funds they can from the now-defunct cryptocurrency exchange.
BlockFi, a crypto lender that went belly up soon after FTX’s collapse, sued Emergent in late December 2022 for control of Robinhood’s shares. It said it had backed a $546 million loan Bankman-Fried and Wong had taken out from Alameda, a crypto hedge fund that was part of Bankman-Fried’s once sprawling crypto empire, to purchase Emergent's stake in Robinhood.
A little more than a week later in early January, an attorney for the Justice Department told a federal judge that the government was in the process of seizing Bankman-Fried’s shares. The disgraced founder of FTX had a 90% stake in Emergent Fidelity Technologies, and Wong owned 10% of the holding company.
Lawyers for Bankman-Fried soon filed an objection to the Justice Department’s seizure in FTX’s bankruptcy proceedings. They said that Emergent was not party to FTX’s bankruptcy case, as it’s not owned by Alameda or any other entity included in the proceedings.
Bankman-Fried’s lawyers, citing case law, wrote that the disgraced crypto mogul needs the Robinhood shares for legal fees, as the “financial inability to defend oneself has serious consequences.”
Robinhood is reportedly in talks with the Justice Department over the share buybacks. “We believe it will be accretive over time and remove the distraction for shareholders,” Vlad Tenev, CEO of the brokerage, said on Wednesday on an earnings call.
Robinhood's shares rose around 5 percent in after-hours trading following its earnings report, which included news of an ongoing decline in crypto trading revenue.
