The fallout from Sam Bankman-Fried’s fall from grace continues as his joint venture with former FTX exec Gary Wang recently filed for bankruptcy.

Emergent Fidelity Technologies filed for Chapter 11 bankruptcy on Friday, February 3rd, amidst an ongoing power struggle as to who should hold the 56 million shares in Robinhood Markets stocks following Bankman-Fried’s arrest and the eventual downfall of the FTX Group.

Bankman-Fried owns 90% of Emergent Fidelity, while Wang owns the remaining 10%.

Disputed Assets

Emergent Fidelity’s Robinhood shares are worth over $600 million based on current prices, and they are currently under dispute as these are being seen as a way to pay off FTX’s creditors. Bankman-Fried previously pledged these shares to failed crypto lender BlockFi as collateral, but the latter also filed for bankruptcy last year.

Likewise, Bankman-Fried declared that he ought to keep control over the shares – to no avail as these were seized by federal officials last month. Other than Bankman-Fried, the disputed shares are also being claimed by BlockFi who, as stated, was promised them as collateral; and the US Department of Justice as evidenced in the fallen FTX founder’s ongoing legal issues.

Breathing Space

According to reports, filing for Chapter 11 bankruptcy gives Emergent Fidelity and its liquidators some wiggle room in light of the way there are so many claimants to the disputed Robinhood shares.

In a court filing, Angela Barkhouse, a member of the Joint Provisional Liquidators (JPLs) for the case, stated that their primary duty is to Emergent Fidelity’s creditors, whoever these may be. 

That said, filing for Chapter 11 protection is the sole way by which the company can be empowered to defend itself, its assets, as well as the interests of its creditors in the United States.

The Silvergate Matter

Current events also underscore the way federal regulators have put additional pressure on the cryptocurrency sector.

This latest chapter in the ongoing FTX drama occurred just as the Department of Justice’s fraud unit began its investigation into Silvergate Capital’s working relationship with FTX and its equally beleaguered subsidiary Alameda Research.

While Silvergate has not been accused of any issues, US senators Elizabeth Warren, John Kennedy, and Roger Marshall recently asked the company regarding its role in transferring FTX customer funds to Alameda.

Silvergate is presently reviewing all transactions involving either or both FTX and Alameda and claims that it conducted due diligence on both companies during the onboarding process.