Robinhood Buys Back Sam Bankman-Fried’s Seized Shares Worth $600 Million

Robinhood completed on Thursday a buyback of $606 million in seized shares that were once in the hands of FTX founder Sam Bankman-Fried, according to an SEC filing, following a court’s approval earlier in the week. 

The shares were valued at $450 million when the U.S. Justice Department (DOJ) took custody of them in January. Just a month prior, Bankman-Fried was arrested and charged with over a dozen crimes related to the collapse of crypto exchange FTX last November. The founder has pleaded not guilty and awaits trial schedule for October.

Robinhood said in Thursday’s filing that it had used corporate cash on its balance sheet to make the repurchase of the FTX founder’s shares. District Judge Lewis Kaplan, who ordered a deal could take place and oversees Bankman-Fried’s criminal fraud case, ruled the DOJ could’ve rejected Robinhood’s offer if it benefited people associated with the disgraced crypto mogul’s alleged crimes.

“The [U.S. Marshalls Service] or their designees are authorized to pursue a private sale of the Robinhood Shares,” he wrote, adding the move is “in the best interests of the relevant stakeholders.”

Robinhood’s share price was up around 3% on the day, as of this writing, and its market capitalization was over $10 billion. Robinhood’s Chief Financial Officer Jason Warnick said on Friday Robinhood was “happy to have completed the purchase” of Bankman-Fried’s 7.6% stake. 

Robinhood shares previously popped after company CEO Vlad Tenev said its board of directors had approved the repurchase in February, rising around 5% in after-hours trading. It would remove a distraction for shareholders, he explained.

Bankman-Fried and FTX cofounder Gary Wang, who has pleaded guilty to crimes in connection with FTX’s collapse, purchased the Robinhood shares through a holding company dubbed Emergent Fidelity Technologies months before the crypto exchange came crashing down.

Wang and Bank-Fried tapped FTX’s sister company, Alameda, for a $546 million loan to ultimately make the purchase, a court filing from last December revealed. Bankman-Fried and the FTX’s inner circle have been accused of making exorbitant loans with customer funds, among other misconduct.

Not long after FTX went under, the defunct crypto lender BlockFi filed a lawsuit against Bankman-Fried and said the Robinhood shares were pledged to it under the terms of an agreement made last November. Kaplan’s order on Wednesday lists BlockFi as a company that should be notified if the deal with Robinhood fell through.

In January, Bankman-Fried’s lawyers filed a request for him to keep the shares, saying they were required to help bankroll his criminal defense. Kaplan’s order approving a sale stipulated that net proceeds will be held in the DOJ’s seized asset deposit fund.