Key Takeaways

• Sam Bankman-Fried and FTX co-founder Gary Wang purchased a 7.6% stake in Robinhood final Could
• Bought for near half a billion, the funds have been raised through a mortgage from sister buying and selling agency Alameda Analysis
• In November, FTX was revealed to be bancrupt, after it despatched buyer property to Alameda to shore up buying and selling losses, finally resulting in an $8 billion gap on the steadiness sheet
• Robinhood administrators have permitted a plan to buy again the 7.6% stake 

The king of the crypto villains could also be beneath home arrest at his dad and mom’ $4 million dwelling in California, however the remainder of the world continues to scrub up the mess attributable to FTX. 

Sam Bankman-Fried’s previously tier-1 change, FTX, collapsed in November. One of many fascinating tidbits to return out of this, except for workers’ obvious love of the drug Adderall, was the presence of Robinhood shares on the steadiness sheet. 

FTX had bought 56 million shares of Robinhood in Could 2022, the identical month that LUNA collapsed, which we now know induced massive losses at FTX’s sister agency Alameda Analysis and led to Bankman-Fried sending buyer property to cowl the losses and meet margin calls. The shares comprised a 7.6% stake in Robinhood. 

Bankman-Fried purchased Robinhood stake with borrowed funds

In an affidavit to a Caribbean court docket previous to his arrest, Bankman-Fried revealed he and FTX co-founder Gary Wang borrowed over $546 million from Alameda final April. This cash was used to capitalise Constancy Applied sciences Ltd, which is a shell company by way of which the Robinhood stake was purchased. 

The shares had been pledged as collateral in opposition to a mortgage taken out by Alameda. Which if it sounds odd, it ought to, as a result of as mentioned above, Alameda is the exact same agency whose funds have been used to buy the shares within the first place.

Like all the pieces within the FTX/Alameda universe, it was a round economic system backed by nothing. In fact, hindsight is 20/20 and all that.  

Robinhood to rebuy shares

A submitting Wednesday by Robinhood’s board of administrators permitted a plan to repurchase the stake, price $586 million at present market costs. 

“The proposed share buy underscores the boldness the Board of Administrators and administration workforce have in our enterprise,” mentioned Robinhood’s chief monetary officer Jason Warnick.

Robinhood went public in July 2021, and in numerous methods grew to become the poster youngster of the pandemic market hysteria. Its app spiked to the highest of downloads, with retail merchants taking to the markets with their stimulus cheques. 

The agency grew meteorically, finally going public in July 2021, within the warmth of the bull market. Its share value since has completed what nearly all the pieces inside the tech and crypto house has – plummeted. 

Finally, this shouldn’t change a lot for HOOD traders. As for the crypto house, the additional it strikes away from the disgraced Sam Bankman-Fried the higher.