Sam Bankman-Fried, former CEO of bankrupt cryptocurrency exchange FTX, borrowed over $546 million from its affiliate trading firm, Alameda Research, to purchase a 7.6% stake in Robinhood Markets (NASDAQ:HOOD), as per court documents.
In an affidavit provided to the Eastern Caribbean Supreme Court prior to his arrest in the Bahamas, Bankman-Fried said that he and FTX co-founder Gary Wang borrowed money from Alameda through four promissory notes in April and May 2022. They used this money to capitalize a shell firm called Emergent Fidelity Technologies Ltd. that bought a 7.6% stake in Robinhood in May. Bankman-Fried has a 90% stake in Emergent, while Wang owns the remaining 10%.
The disclosure comes at a time when crypto lender BlockFi, the FTX Group, and Bankman-Fried himself have laid claim to more than 56 million Robinhood shares. BlockFi, which filed for bankruptcy last month, has sued Emergent for control of the Robinhood shares. BlockFi alleged that Bankman-Fried owed these Robinhood shares to the company due to a deal between them made in early November. Under the deal, Robinhood shares were pledged as collateral against a loan taken from BlockFi by Alameda.
The FTX fiasco has shaken the already battered crypto market and also dragged down Robinhood stock. Recently, Citigroup analyst Christopher Allen downgraded online trading company Robinhood to a Hold from Buy, citing several reasons, including the “potential implications” for the company stemming from the FTX collapse.
Is Hood a Good Stock to Buy?
Wall Street is sidelined on Robinhood Markets stock, with a Hold consensus rating based on three Buys, five Holds, and two Sells. The average HOOD stock price target of $13.28 implies 72.5% upside potential. Shares have declined nearly 57% year-to-date.
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