Crypto exchange FTX secures backing from venture capital and hedge funds

The cryptocurrency exchange FTX has raised one of the largest rounds of financing for a digital assets start-up, in a signal of continued investor demand for the sector despite the recent drop in the price of bitcoin.

FTX said it raised $900m from more than 60 investors including the venture capital firms Paradigm and Sequoia Capital and the private equity group Thoma Bravo, valuing the business at $18bn. A previous round of funding valued FTX at $1.2bn last year.

Known mainly for its cryptocurrency derivatives exchange, FTX has quickly risen to become one of the main challengers to Binance, Coinbase and other more well-established marketplaces. An FTX spokesperson said the company’s annualised revenue was near $1bn.

FTX, which is domiciled in Antigua and has its main office in Hong Kong, has begun expanding its footprint in the US, though it bars Americans from trading on its main derivatives exchange due to regulations. Its US marketplace, FTX US, offers more limited trading services.

Other investors in the round of funding included Japan’s SoftBank; Daniel Loeb’s Third Point; the family of hedge fund manager Paul Tudor Jones; and Izzy Englander, the head of Millennium Management. FTX said Paradigm, the fintech venture firm Ribbit Capital, and the brokerage BTIG, helped its ventures team on the fundraising effort. Ribbit is also an investor.

“We started out as a new derivatives exchange two years ago, and this round will help us continue to build out a bigger and broader vision for what FTX could become,” said Sam Bankman-Fried, its chief executive.

The financing comes after a boom in cryptocurrency trading in the past year, which has sent investors flooding into the sector. Venture capitalists have invested $7.3bn in nearly 670 cryptocurrency start-up deals since the start of 2021, according to PitchBook data, already surpassing the dollar total for all of last year.

FTX’s revenues had increased by a factor of 10 this year, and its exchange averages more than $10bn in daily trading volume from more than 1m users, the company said. Earlier this year, FTX paid $135m to buy the naming rights to the Miami Heat’s basketball arena.

In recent months, bitcoin and other cryptocurrencies have taken a tumble as global regulators increase their scrutiny, particularly on stablecoins and large exchanges. Shares in Coinbase, which went public at a market capitalisation of about $76bn in April, have since sunk more than 20 per cent.

Bankman-Fried told the Financial Times this month he viewed established financial institutions, such as Goldman Sachs and the exchange operator CME Group, as eventual acquisition targets as FTX grows in size.

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Forbes recently estimated Bankman-Fried’s net worth at $8.7bn. He also runs Alameda Research, a cryptocurrency trading firm with more than $1bn in digital assets.

Binance, which was an early investor in FTX, had sold its stake in the company, a Binance spokesperson confirmed. The exchange has recently run into trouble with regulators in Europe and Asia.

“The world needs a high-quality, global crypto exchange that will co-operate with regulators,” said Alfred Lin, partner at Sequoia, who has overseen the firm’s investments in Airbnb and DoorDash. “FTX is that exchange and has the potential to become the leading financial exchange for all types of assets.”