Infamous crypto exchange FTX has cleared a major hurdle in its bankruptcy proceedings by reaching a $14 million settlement with Emergent Technologies, resolving a dispute over $600 million in Robinhood shares.
Terms Of Settlement
FTX, the bankrupt cryptocurrency exchange, has settled a significant dispute over $600 million worth of Robinhood shares with Emergent Technologies. This development, outlined in a motion filed by FTX CEO John Ray III in the Delaware Bankruptcy Court on September 6, resolves one of the many issues surrounding the collapse of Sam Bankman-Fried’s crypto empire.
Emergent Technologies, a firm co-founded by Bankman-Fried, had previously laid claim to 55 million Robinhood shares and associated cash. Under the settlement, FTX will pay Emergent $14 million to cover administrative expenses, and Emergent will relinquish all claims to these shares and cash.
Background of the Dispute
The disputed Robinhood shares had been a focal point since FTX’s collapse in November 2022. Emergent acquired the shares in May 2022 through an agreement with Bankman-Fried and his trading firm, Alameda Research. After FTX’s bankruptcy, several parties claimed ownership of the shares, including FTX, Emergent, BlockFi, and Bankman-Fried himself.
In January 2023, the U.S. Department of Justice seized the shares as part of its investigation into FTX’s downfall. On September 1, 2023, Robinhood repurchased the shares for approximately $606 million, effectively settling the ownership issue.
Implications of the Settlement
This agreement marks a key step in FTX’s efforts to streamline its bankruptcy proceedings and maximize value for creditors. FTX’s settlement aims to resolve the complex web of claims surrounding its assets, helping the exchange develop a plan to repay creditors and potentially revive operations. The deal also allows Emergent to resolve its bankruptcy case in Antigua swiftly.
Emergent Fidelity Technologies filed for Chapter 11 bankruptcy in February 2023. As part of the settlement, Emergent, its Joint Liquidators, and Fulcrum (another involved party) have agreed not to object to any FTX reorganization plan that aligns with the settlement terms. This agreement ensures smoother bankruptcy proceedings for both FTX and Emergent.
In addition, FTX has agreed to withdraw its legal action against Emergent, known as the BlockFi Action, once the settlement is approved. This move aims to reduce ongoing litigation costs and provide clarity in the bankruptcy process.
Approval and Next Steps
The settlement requires approval from both the Delaware Bankruptcy Court and the Antigua Court to become effective. A hearing is scheduled for October 22, 2024, to determine the approval of the agreement. If approved, this settlement will represent a significant milestone in FTX’s bankruptcy process, removing a major obstacle in the exchange’s path to restructuring.
Current FTX CEO John Ray III emphasized that the deal resulted from “good faith arm’s length negotiations” and was free from any collusion.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
