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FTX Increases Revenue 1,000% During Crypto Rush: Financial Leak


Sam Bankman-Fried, founder and chief executive officer of Cryptocurrency Derivatives Exchange FTX, said during an interview on an episode of Bloomberg Wealth with David Rubenstein in New York, U.S., on Wednesday, August 17, 2022.

Jeenah Moon | Bloomberg | beautiful pictures

FTX fueled the crypto craze to $1 billion in revenue last year while expanding its global reach through a series of acquisitions, according to internal documents reported by CNBC.

Audited financials provide a rare glimpse into a privately held startup’s finances. FTX was profitable, rapidly expanding globally, and saw dizzying growth.

The privately held crypto exchange’s revenue has grown by more than 1,000% from $89 million to $1.02 billion in 2021. Its profits, like many startups, depend on on how you measure it. Operating income was $272 million, up from $14 million a year earlier. FTX had net income of $388 million last year, up from just $17 million a year earlier.

FTX declined to comment on the leaked financial documents.

The company brought in $270 million in revenue in the first quarter of 2022 and is on track to do about $1.1 billion in revenue by 2022, an investor source told CNBC. But it’s unclear how well FTX held up in the second quarter as the cryptocurrency’s recent price plunge is known as “Crypto winter. ”

By comparison, publicly traded Coinbase also experienced a cash boom in the crypto bull market, with $7.4 billion in sales and $3.6 billion in net income last year. But for Q2 of this year, it reported revenue of $808.3 million, down 64% from the previous quarter and a surprise. net loss was $1.1 billion, compared with $1.59 billion in net income in the same quarter last year, as retail transaction volumes increased.

FTX was founded three years ago by former Wall Street quantum trader Sam Bankman-Fried. The 30-year-old CEO recently became the industry’s lender of last resort, looking to back companies as liquidity dries up. In addition to hundreds of millions of dollars in loans, Bankman-Fried companies also sought to buy back distressed assets. In July, FTX Signed a deal that gives it the option to buy BlockFi from a lender and is in discussion for a buyback Bithumb. FTX also offered to buy Voyager in August but was rejected because of what the company claimed was a “low bid.”

According to the documents, FTX had about $2.5 billion in cash at the end of last year and a 27% profit margin, according to the documents. Profit margins are close to 50% if advertising and “stakeholder” costs are excluded. It last raised funds in January, raising $400 million from investors like SoftBank’s Vision Fund 2 and Tiger Global, at $32. Billion pricing.

Global Footprint

FTX was founded at a time when Coinbase and Binance had cemented themselves as the largest exchanges in the world. Coinbase still largely operating within US-based Binance, the largest exchange by trading volume started operations in China, then moved its headquarters to the Cayman Islands, and is now driving the US market with a US subsidiary.

FTX has been quietly building its own team of global subsidiaries to compete.

FTX Trading Ltd is headquartered in Antigua, with FTX Derivatives Markets based in the Bahamas, where Bankman-Fried lives. FTX Trading recently acquired DA AG Digital Assets, outside Switzerland, as well as IFS Group and Hive outside Australia – bringing the total to 15 smaller companies worldwide. The companies in its portfolio span Cyprus, Germany, Gibraltar, Singapore, Turkey and the United Arab Emirates, among other countries, according to the documents. Cryptocurrency companies often acquire startups to quickly obtain the proper regulatory license to set up shop in a new country.

Bankman-Fried also founded the trading company Alameda Research, which accounts for about 6% of FTX’s exchange volume, according to the documents.

Technically, FTX’s business in the United States is owned by a parent company, West Realm Shires Inc. As of 2021, FTX US accounts for less than 5% of FTX’s total revenue. However, the company is pushing to expand here with a series of popular advertisements and sponsorships.

FTX spent about 15% of its revenue on advertising and marketing in 2021, according to the documents. That could account for the 2022 Super Bowl commercial with actor Larry David and celebrity endorsements by Tom Brady and Giselle Bündchen, who are also equity investors in the company. FTX also purchased the naming rights to Miami’s NBA arena, formerly American Airlines Arena. FTX plans to spend about $900 million on advertising in the coming years, according to the documents.

Cryptocurrency exchanges are also expanding into stock trading. It launches stock trading weeks after Bankman-Fried took 7.6% passive shares of Robinhood, fueling speculation that FTX is looking to buy trading apps in a network of premises for retail accounts in the United States. Robinhood and Bankman-Fried have denied that a deal is in the works.

FTX has certainly stepped up its retail expansion efforts. But the documents show that it is still mainly a place for more sophisticated traders using derivatives – futures or options. Sixty-seven percent of revenue comes from futures trading fees, while about 16% comes from so-called spot trading. Futures and derivatives trades tend to be more lucrative for exchanges.



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