Collapsed crypto lender BlockFi has commenced legal action against Emergent Fidelity Technologies, a holding company owned by FTX founder Sam Bankman-Fried, seeking the recovery of shares in Robinhood Markets Inc (NASDAQ:HOOD).
BlockFi alleges that Emergent has defaulted on its obligations under a pledge agreement “by, among other things, failing to satisfy its payment obligations and to promptly deliver the Collateral to BlockFi Inc.”
Court documents do not place a dollar value on the lawsuit, but according to Eikon data seen by Reuters, Emergent holds a 7.42% share of HOOD stock.
Robinhood has a market capitalisation of more than US$8.1bn, placing a value of US$605mln on Emergent’s HOOD holdings.
Emergent’s broker ED&F Man Capital Markets (EDFM) has also been summoned, with court documents stating: “Following the event of default, BlockFi sought to have the collateral transferred to it, but EDFM has refused to transfer the Collateral to BlockFi.”
BlockFi is seeking an order directing Emergent and EDFM to “immediately transfer the collateral to a neutral party, such as a neutral broker or escrow under the court’s supervision, and ultimately to BlockFi”.
BlockFi filed for bankruptcy protection
BlockFi’s legal action comes on the same day as the company filed for Chapter 11 bankruptcy protection before the New Jersey courts.
Both Robinhood and BlockFi were the targets of bailouts by SBF’s once-mighty crypto empire, but while Robinhood’s exposure to SBF’s bankruptcy was limited, BlockFi found itself suddenly without a multi-million-dollar credit line essential for its survival.
Per BlockFi’s Chapter 11 filing, the New Jersey-based company said it owes debts to more than 100,000 creditors, including $729mln to its largest creditor Ankura Trust Company.