Three separate groups file competing claims for Bankman-Fried's forfeited assets in FTX bankruptcy

In the latest chapter of FTX's bankruptcy process, three separate groups have filed recent claims over the assets seized from Sam Bankman-Fried following his criminal conviction. 

The FTX debtors' estate, led by John Ray III, Bankman-Fried's replacement as CEO, filed a claim on Friday to six categories of assets that government prosecutors have seized from Bankman-Fried, including funds at banks in the name of FTX-related entities Alameda Research and FTX Digital Markets, two private jets, Bankman-Fried and former FTX CFO Luk Wai Chan's funds at Silvergate bank, political contributions made by Bankman-Fried and other FTX executives, and, notably, the proceeds from the sale of Robinhood shares held by an FTX entity called Emergent Fidelity Technology Ltd ("Emergent"). 

The debtors' estate claims in its filing that although Bankman-Fried was ordered to forfeit the relevant assets, they never belonged to him in the first place, given that the assets resulted from his criminal behavior. "As established at trial, all of the Specific Property was held in the name of a Debtor entity or FTX Digital, and/or was funded entirely by Debtor assets," the filing claims. 

The debtors' estate asserts in its filing that granting its claim over the assets in question "...will benefit all the creditors and stakeholders in the Debtors’ Chapter 11 bankruptcy proceedings and FTX Digital’s liquidation in The Bahamas, including victims of Bankman-Fried’s crimes." 

Antigua fights for $625 million in Robinhood share proceeds

However, two other claims have been filed over some of the assets in question: one from Antigua's court-appointed liquidators, and another from lawyers representing FTX creditors in a class-action suit in the Southern District of Florida. 

The Antiguan court-appointed liquidators who seized Emergent, the entity used to purchase hundreds of millions of dollars worth of Robinhood shares, filed two separate arguments in an attempt to hold on to Emergent's assets: roughly $625 million, which includes around $20 million in cash and the proceeds from the Robinhood shares which have already been seized and sold by the U.S. government. 

They first argue that Emergent's purchase of Robinhood shares using margin loans, which Bankman-Fried himself likely directed given his 90% ownership stake in Emergent, was independent from any wrongdoing at FTX or Alameda. (FTX co-founder Gary Wang holds the remaining 10% of Emergent.) According to Emergent's filing, "Although the Defendant [Bankman-Fried] had an ownership interest in Emergent, at no time did the Defendant own the Robinhood Shares or the Emergent Cash."

The liquidators attempt to further distance Emergent from Bankman-Fried by stating that "...according to Government Exhibit 1032, admitted at trial, the government only attempted to trace $292 million of the Robinhood Shares to the Defendant's criminal conduct."

In its second filing, the liquidators argue that they've incurred "great expense" by fighting off Bankman-Fried's own attempts to seize Emergent. "Under Antiguan law, court-appointed liquidators have a right to recover their professional expenses that is superior to any other claims on estate assets. 

Bankman-Fried himself was ordered to pay those legal fees following failed attempts to seize Emergent but, according to the filing, "To date, [Bankman-Fried] has not complied with any of the...orders compelling him to pay fees and costs."

The Debtors' estate was likely aware such a claim would be filed, according to one section of their recent filing. "The Debtors also have engaged in discussions with Emergent regarding a potential resolution pursuant to which Emergent would acknowledge the Debtors' superior interest in the Robinhood shares and other funds held in the Emergent account and waive any potentially competing claims without the need for further litigation," their filing states, without further detail on the nature of that potential resolution. The filing also notes that "the Debtors dispute the assertions of interest in this property set forth in the petitions filed by Emergent and Emergent's Joint Liquidators...and will respond to those assertions at the appropriate time, should those petitions not be dismissed." 

Creditor-led class action also asserts claims

Simultaneously, a class-action suit compiling several claims led by lawyers hired by Sunil Kavuri, a representative of the largest FTX creditor group, engaged in multi-district legislation in the Southern District of Florida has also asserted claims to many of the assets in question. ("A significant part of FTX’s conduct allegedly emanated from [the Southern District of Florida], where it had its U.S. headquarters before filing for bankruptcy," an earlier filing explains.) 

"The jury found that the $8 billion Forfeited FTX Customer Assets are derived from SBF's fraud on FTX customers, not the FTX companies (now represented by the bankruptcy estate)," the filing from law firms Boies Schiller Flexner and The Moskowitz Law Firm states (emphasis in original). Therefore, the forfeited assets, including the Robinhood shares, funds from bank accounts, seized crypto tokens, and more should be returned to customers rather than the debtors' estate, the filing claims. 

Part of the motivation for the suit is the desire to return creditors' assets as an in-kind distribution, rather than claims dollarized at the bankruptcy petition date. The suit also alleges that the debtors' estate is saddled by conflicts of interest that could compromise the "just distribution of the Forfeited FTX assets." 

In its competing filing, the debtors' estate asserts that despite the above claims to the contrary, it's in the creditors' best interest for the bankruptcy court to grant its claim. "The Debtors and FTX Digital will continue to work in close coordination with the Government and other authorities, as well as in consultation with other stakeholders, to distribute funds through a process that complies with applicable federal laws and regulations, furthers the aims of victim recovery, maximizes the funds available for distribution, and minimizes administrative and professional costs," the filing states. 

Each filing requests a hearing to adjudicate the claims within; it's currently unclear when those hearings would take place. The FTX debtors' estate and the lawyers representing creditors did not immediately respond to requests for comment from The Block. 

Updated to include additional information about the liquidators' filings.