BlockFi sues Sam Bankman-Fried over Robinhood shares

Bankrupt cryptocurrency lender BlockFi is suing Sam Bankman-Fried over shares in Robinhood that the FTX founder allegedly pledged as collateral earlier this month.

Just hours after filing for bankruptcy protection, BlockFi on Monday sued Bankman-Fried’s Emergent Fidelity Technologies vehicle, demanding he turn over unspecified collateral BlockFi says it is owed. The complaint was filed in the same New Jersey court where BlockFi initiated bankruptcy proceedings.

The collateral at issue is Bankman-Fried’s stake in Robinhood, the online trading company, according to loan documents seen by the Financial Times. He bought 7.6 per cent of Robinhood earlier this year.

The dispute is the latest blow to Bankman-Fried, whose $32bn FTX empire collapsed this month in what is the biggest insolvency of this year’s crisis in crypto markets. Authorities in the US and the Bahamas, where FTX was headquartered, have launched investigations.

BlockFi’s bankruptcy filing shed further light on Bankman-Fried’s fall, showing that his failed crypto trading firm Alameda Research defaulted on $680mn of collateralised loans in early November.

The complaint claims that BlockFi entered into an agreement with Emergent on November 9 to guarantee the payment obligations of an unnamed borrower by pledging certain “common stock” as security.

Earlier in November, the Financial Times reported that Bankman-Fried had been privately attempting to sell the Robinhood shares using the secure messaging app Signal in the days leading up to FTX’s bankruptcy filing on November 11.

BlockFi also named brokerage ED&F Man Capital Markets in its lawsuit, saying the London-based company was the broker involved in the pledge agreement. ED&F Man has “refused to transfer the Collateral to BlockFi”, the lender states in the complaint.

BlockFi, Bankman-Fried and ED&F Man did not immediately return requests for comment.