FTX founder Sam Bankman-Fried said Tuesday that he and the platform’s co-founder, the late Gary Wang, borrowed more than $546 million from Alameda Research to purchase a nearly 8% stake in Robinhood, the popular investment app. The statements are part of a statement from SBF, as the cryptoguru was known on social networks, to the Antigua and Barbuda authorities and which have now been made public by the US Justice.
It is not the first time that rumors have emerged that associate the FTX crypto empire with the service that allows users to operate on the Stock Market at no cost. Even when he owned 8% of the firm, Bankman-Fried denied the purchase rumors, although he did not rule out the possibility of “an eventual alliance”. This generated the expectation in the market that Robinhood could offer new services to invest in crypto assets.
Robinhood, which is listed on the New York Stock Exchange, has seen how the scandal affected its price. As of Tuesday’s close, its shares were around $7.70, more than 90% below its all-time high of $85.
The origin of the fraud
Bankman-Fried explains the step by step of his actions: together with the co-founder of FTX, the still deceased Gary Wang, they created a shell company called Emergent Fidelity Technologies, established in Antigua. This is no surprise: the crypto empire had more than 100 subsidiaries distributed throughout the world.
The executives borrowed the funds from Alameda Research, the investment firm also founded by Bankman-Fried, which is at the center of fraud cases being investigated by the Prosecutor’s Office. In total, both received more than 545 million dollars from this firm without any type of control or review and with the sole purpose of “acquiring shares in Robihood”, as the court brief highlights.
The new revelations are in line with the Securities and Exchange Commission’s indictment a few days ago, which accused Bankman-Fried of building “a house of cards founded on deception” for its own benefit. The indictment noted that the former FTX CEO was guilty of “orchestrating a massive, multi-year fraud, in which he siphoned off billions of dollars of trading platform client funds for his own personal gain and to help to grow your own empire.
What is unexpected is that there is a receipt for the four transfers from Alameda to Emergent Technologies. The lack of organization and accounting systems were a characteristic detail of the administrative chaos that was FTX, as described by old and new employees. All notes also bear the signature of Carolyn Ellison, the CEO of Alameda Research, who currently collaborates with the authorities in their investigation against SBF.
These revelations only increase the legal dispute between the multiple actors seeking to take over the assets that belonged to Bankman-Fried. John J. Ray III, the new head of FTX, considers that the Robinhood shares belong to the firm that he now leads, which is subject to the United States Bankruptcy Law. This would give some air to the attempts to get out of what was the largest cryptocurrency exchange platform.
In addition to Ray and other individual investors in FTX, other firms are looking to take a piece of Robinhood. BlockFi, a cryptocurrency lending platform in which Bankman-Fried took a stake in May this year, believes that part of these shares were pledged as collateral to avoid bankruptcy.
For now, the shares will continue to be controlled by the US Bankruptcy Court, although there is also a dispute between the authorities of Antigua and those of the states of New York and Delaware. Robinhood CEO Vlad Tenev said on Tuesday that he, too, does not know what will happen in the future. “We’re just seeing how this plays out,” he said.