BlockFi Files Appeal to Cancel SBF Offshore Investment Vehicle Bankruptcy Protections

UTC by Tolu Ajiboye · 3 min read
BlockFi Files Appeal to Cancel SBF Offshore Investment Vehicle Bankruptcy Protections
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Bankrupt crypto lender BlockFi is asking a court to dismiss SBF’s appeal for Emergent Fidelity bankruptcy protections.  

BlockFi has filed an appeal with the US Bankruptcy Court in Wilmington, Delaware, to remove bankruptcy protections from an SBF offshore investment vehicle. Last week, the insolvent crypto lender requested a court ruling to strip Bankman-Fried’s bankruptcy appeal for Emergent Fidelity Technologies Ltd. BlockFi says the offshore investment vehicle’s bankruptcy status serves little purpose. Instead, the troubled digital asset lender opined that Emergent Fidelity’s bankruptcy status could undermine its own Robinhood (NASDAQ: HOOD) share claims.

It is worth noting that SBF used Emergent Fidelity to buy a 7.6% stake in Robinhood between April and May last year. At the time, the disgraced former FTX CEO forked out $648 million in funds borrowed from Alameda Research for the acquisition.

Emergent Liquidator Rep Sheds Light on SBF Appeal Following BlockFi Motion

Despite BlockFi’s suggestions that Emergent Fidelity’s Chapter 11 bankruptcy status was futile, an involved liquidator begs to differ. According to an Emergent liquidator representative from financial adviser Quantuma, the bankruptcy filing serves to protect all creditor rights. As Quantuma director Toni Shukla put it:

“Given the many parties claiming to be creditors or outright owners of Emergent’s assets in different lawsuits in the US, the [liquidators] believe that chapter 11 protection is the only practical way to empower Emergent to defend itself, its assets, and its creditors’ interests in the US.”

Shukla also clarified in an affidavit that Emergent owns no substantial assets apart from the shares. Furthermore, the Quantuma director added that prosecutors seized over $20 million in cash once held by the offshore investment platform. Therefore, she described the BlockFi motion against the SBF appeal and Emergent Fidelity as baseless. According to Shukla, it is wrong for BlockFi to allege that fees motivated the SBF offshore company’s bankruptcy filing.

BlockFi previously staked a claim to the Robinhood shares as a $600 million loan collateral to trading firm Alameda. However, FTX and Alameda’s new insolvency management team has also claimed an interest in Emergent’s Fidelity’s now government-controlled assets.

Emergent Fidelity had pledged the HOOD shares to BlockFi as collateral as part of a pledge agreement. Former Alameda chief executive officer Caroline Ellison signed the agreement days before the FTX collapse in November.

US prosecutors took control of Emergent Fidelity’s assets in connection with the pending criminal case against Bankman-Fried. However, SBF’s legal team is also trying to regain control of the investment company from its offshore liquidators.

Meanwhile, Robinhood previously expressed intent to repurchase the Emergent shares. However, the financial services company also admitted that it is unsure whether such a buyback is possible at this time.

Share Recovery Costs

Emergent Fidelity has amassed approximately $1.8 million in professional fees since the liquidators’ appointment. According to court filings, these fees were spent liquidating proceedings in several jurisdictions, with Emergent also seeking additional funding agreements. The SBF offshore investment platform partnered with a Fulcrum Capital Markets LLC fund to preserve and recover the shares. Under this agreement, Fulcrum would invest as much as $2 million, with projected returns of up to 3 times higher.

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