What Happened: Federal prosecutors are now alleging that Sam Bankman-Fried purchased 56 million Robinhood shares to obscure his criminal use of FTX customer property.
The allegation was made in a letter to U.S. bankruptcy judge Lewis Kaplan, as reported by CNN on Monday.
The prosecutors argued that Bankman-Fried’s original purchase of these funds were made through a foreign special purpose vehicle, with no public connection to FTX or Alameda, further evidence the steps he took to hide his criminal misconduct.
The Robinhood Shares: Last month, Bankman-Fried attempted to reclaim ownership over these Robinhood shares, which he purchased with FTX co-founder Gary Wang using $546 million worth of borrowed funds from Alameda Research.
Bankman-Fried and Wang funded this purchase with four promissory notes from Alameda through a shell corporation called Emergent Fidelity Technologies.
Was SBF Angling to Give Bahamian Regulators Control?
Additionally, Wang, who is now cooperating with prosecutors, disclosed that Bankman-Fried wanted to stall the U.S. bankruptcy process in order to assist with foreign regulators (presumably, the Bahamian Securities Commission), because he believed they might allow him to regain control of FTX.
Based on their actions in the weeks following FTX’s bankruptcy filing, theBahamas Securities Commission (BSC) haven’t exactly painted a picture of themselves as regulators that follow an orthodox standard operating procedure.
The BSC reportedly directed FTX to transfer all user assets to a government controlled wallet after its bankruptcy filing. FTX also claimed that it had begun to facilitate withdrawals to Bahamas-KYC accounts at the direction of local regulators – something that caused a great degree of confusion after an alleged exploiter also took control of FTX user funds around the same time.
In seemingly contradictory follow-up statements, the BSC denied that it had authorized these withdrawals, but confirmed it held $3.5 billion worth of FTX user assets on behalf of the firm. This figure was called into question by FTX’s liquidators, who claimed that the BSC only held $296 million worth of user funds.
Where Are the Funds Now? As things stand, it doesn’t look like Bankman-Fried will be able to regain possession of these shares any time soon. Prosecutors have seized $700 million worth of Bankman-Fried’s assets, which include the controversial Robinhood shares.
Still, the former FTX CEO is contesting the government’s claims to these assets. Lawyers for Bankman-Fried argued that he should be given access to his assets and crypto held on FTX and Alameda, saying that the government had found no evidence tying him to illicit transfers made by Alameda wallets.
The conditions of Bankman-Fried’s bail were amended to specifically restrict his access to these funds.
“Given that the sole basis advanced for seeking that condition has not been supported, we believe that the bail condition imposed at the conference should be removed,” said his legal counsel Mark Cohen.
The U.S. Department of Justice responded to this motion, saying his access should remain revoked seeing as he has made attempts to contact several current and former FTX employees – some of whom are witnesses at his trial. The DOJ released a Jan. 2 email sent by Bankman-Fried to current FTX CEO John Ray III, in which he tried to set up a meeting in New York.
