Crypto Exchange FTX Valued At $ 18 Billion During Funding Cycle

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FTX raised $ 900 million in a new round of funding that closed on Tuesday. Participants in the round included Japanese tech investor SoftBank Group Corp., Silicon Valley venture capital firm Sequoia Capital and Third Point, the hedge fund led by billionaire Daniel Loeb, FTX said in a statement.

The transaction propelled FTX into the ranks of the world’s most valuable crypto companies. It also provided a measure of general acceptance for FTX, which bars Americans from trading in its core market to avoid clashing with US regulators. FTX’s head office is in Hong Kong and its parent company, FTX Trading Ltd., is domiciled in Antigua and Barbuda.

Other significant investors in the fundraising cycle included hedge fund billionaires Israel Englander and Alan Howard; the family of another hedge fund billionaire, Paul Tudor Jones; and technology-driven private equity firm Thoma Bravo.

The founder and CEO of FTX is Sam Bankman-Fried, a California native who worked for quantitative trading giant Jane Street Capital LLC before entering bitcoin. FTX has grown rapidly since it began operations in 2019, making Mr. Bankman-Fried, 29, a billionaire.

FTX’s core business is managing a market for risky crypto derivatives that allow traders to place leveraged bets on the rise or fall of digital currencies. FTX handles more than $ 10 billion in transactions per day on average, according to data provider CryptoCompare.

Lately, FTX has sought to gain exposure through sports sponsorships. Earlier this year, the company signed a 19-year, $ 135 million deal to buy the naming rights to the house from the Miami Heat. The stadium is now called FTX Arena. In June, National Football League star Tom Brady became an FTX Ambassador. As part of the deal, Brady and his wife, model Gisele Bndchen, both acquired stakes in FTX.

FTX claims that sports sponsorships are aimed at promoting FTX.US, a crypto exchange aimed at US customers and designed to comply with US rules. FTX.US offers traders a selection of markets that are less exotic than FTX’s main foreign exchange.

The listing of Coinbase, the largest bitcoin exchange in the United States, introduces a new way to invest in cryptocurrencies. WSJ explains how Coinbase is trying to distance itself from bitcoin risks to be successful on Wall Street. Photographic illustration: George Downs

In an interview, Bankman-Fried said FTX plans to use its new funding to gain a foothold in regulated markets. Potentially, this could include acquisitions of companies licensed to carry on financial activities in various countries, he said.

We were looking to get licenses where we could, Bankman-Fried said.

Some of FTX’s rivals have recently come under pressure from regulators. On Friday, Binance Holdings Ltd., operator of the world’s largest crypto exchange, said it would stop offering digital tokens linked to stocks such as Tesla Inc. The move came after regulators in Europe and in Asia have issued warnings regarding Binance and suggested may violate securities laws.

FTX is also aiming to use the proceeds from the Tuesday fundraising round to grow its new payments business. In May, the company launched FTX Pay, a service that merchants can use to accept payments in crypto and traditional currencies. Tuesday’s deal will help FTX integrate the service into a wider range of businesses, Bankman-Fried said.

Other investors in the round included crypto firms Circle, Coinbase Ventures, Multicoin, and Paradigm; venture capital firms Insight Partners, Lightspeed Venture Partners and Ribbit Capital; the VanEck fund manager; and the high speed trader Hudson River Trading. Mr. Bankman remains the majority owner of FTX.

Crypto news site The Block reported in May that FTX was in the process of closing a funding round that would value the company at around $ 20 billion.

Mr Bankman-Fried said it took several months to close the cycle and FTX’s valuation swung sharply in the process due to fluctuations in the crypto markets.

Write to Alexander Osipovich at [email protected]

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