Emergent Fidelity case is “futile,” says the bankrupt crypto lender which is seeking access to its 55 million Robinhood shares.

Bankrupt crypto lender BlockFi on Thursday moved to strike out the bankruptcy case of Emergent Fidelity Technologies, as a battle over around $600 million in assets mainly owned by FTX founder Sam Bankman-Fried becomes ever more complex.

Emergent, an Antiguan shell company 90% owned by Bankman-Fried, owns 56 million shares of online broker Robinhood (HOOD) plus some cash, and apparently little else.

Those assets are now the subject of a legal tussle between FTX, BlockFi, and the Department of Justice and the Robinhood Board itself– and BlockFi believes Emergent’s Antiguan liquidators are making it even more complex by filing for Chapter 11 bankruptcy in the U.S.

“Neither law nor equity require the doing of a futile act. But this bankruptcy case asks the Court to do just that—to ‘reorganize’ an empty shell,” BlockFi’s filing said.

The bankruptcy filing, made Feb. 3, was not made in good faith; the company isn’t eligible, having no employees, no income and no business; and the case exists “solely” to advance the interests of Antiguan liquidators who’ve already gained over $1.7 million in fees, BlockFi said.

BlockFi has taken legal action to secure access to the stocks, which it says were security for a loan made Nov. 9. The Department of Justice seized the assets in January, as it investigates fraud charges against Sam Bankman-Fried and Gary Wang, who owns the remaining 10% of Emergent. Bankman-Fried has pleaded not guilty while Wang has entered a plea deal.

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CEO Zac Prince tweeted that the crypto lender “exercised our best business judgment.”

Crypto lender BlockFi confirmed Thursday it recently liquidated a “large client” amid reports that troubled crypto hedge fund Three Arrows Capital failed to meet margin calls.

“We exercised our best business judgment recently with a large client that failed to meet its obligations on an overcollateralized margin loan,” CEO Zac Prince tweeted. “We fully accelerated the loan and fully liquidated or hedged all the associated collateral.”

Prince’s tweet followed a Financial Times report that Three Arrows – a massive crypto venture capital and trading fund – was liquidated by BlockFi and other top-tier crypto lending firms after it failed to top up its loan collateral.

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BlockFi raised $350 million at a larger valuation of $3 billion in March last year.

Crypto lender BlockFi is set to close a funding round at a lower valuation than its previous raises, according to a report by The Block.

The round will value the New Jersey-based firm at $1 billion, according to the report, which cites sources with knowledge of the matter.

The funding known as a “down round” occurs when a company seeks to raise more capital and discovers that its valuation is lower than during a previous financing.

BlockFi raised $350 million at a larger valuation of $3 billion in March last year. It was reportedly set to raise a further $500 million, valuing it at nearly $5 billion, in late July and had also been making known its plans to go public.

The lower valuation points to the more challenging atmosphere in the crypto industry at present as well as regulatory uncertainty surrounding firms such as BlockFi, which offers high interest payouts against crypto holdings.

In February the firm agreed to pay a total of $100 million in penalties to the U.S. Securities and Exchange Commission (SEC) and several state regulators as part of a settlement in an investigation into whether its high-yield lending product was a securities offering.

BlockFi had not responded to CoinDesk’s request for comment about its latest funding round at press time.

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