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Ripple U-Turns on Fortress Acquisition Just 20 Days After Announcement

Published September 29, 2023 1:29 PM
Teuta Franjkovic
Published September 29, 2023 1:29 PM

Key Takeaways

  • Ripple’s CEO, Brad Garlinghouse, said the company will not move forward with acquiring crypto custodian Fortress Trust.
  • While the acquisition deal is off the table, Ripple will maintain its investment in Fortress.
  • Fortress Trust recently faced a security incident that resulted in a financial loss between $12 million and $15 million.

The CEO of Ripple, Brad Garlinghouse, revealed  that the company had abandoned its intentions to acquire cryptocurrency custodian company Fortress Trust.

Ripple and Fortress Trust did not immediately respond to a request for comment.

Ripple to Still Support Fortress Business

Early in September 2023, Ripple became interested  in the Nevada-licensed financial services company created by Scott Purcell, a former CEO of the now-defunct crypto custodian Prime Trust. When Garlinghouse made that statement, Ripple said it was excited to bring on this team and its technology to accelerate its business.

Since then, Garlinghouse has spoken to the public on social networking platform X and explained why the deal isn’t moving forward.

“A few weeks ago, we signed a letter of intent to acquire Fortress Trust – we’ve since made the decision not to move forward with an outright acquisition, though Ripple will remain an investor in Fortress,” Garlinghouse stated .

The Ripple CEO added that the Fortress team has developed products that address genuine customer needs and is very talented. Even though the result is different from what was anticipated, according to Garlinghouse, Ripple will still support the company and hopes to collaborate again in the future.

Will BitGo Have Another Go?

It’s worth noting that Fortress revealed  it was “affected by a third-party vendor” during the same week the deal announcement surfaced. Subsequent reports clarified Ripple’s purported involvement in helping Fortress’s clients during the incident. As a consequence of this breach, Fortress reportedly incurred a loss of $15 million.

Fortress CEO, Scott Purcell, asserted  that the hack resulted in costs ranging between $12 million and $15 million for the company. The majority of the funds compromised were in Bitcoin, with smaller amounts in Tether and USDC.

With the contract no longer under consideration, Fortress shared Garlinghouse’s social media tweets regarding the situation and reposted  his comments on their official X account page. Financing for Fortress has been provided by various entities, including Mighty Capital, Salt, Ayon Capital, Nevcaut Ventures, Eagle River, and Ripple.

It’s essential to emphasize that neither the company’s custodial partners, Fireblocks nor BitGo, nor the third-party vendor Fortress Trust, were responsible for the security incident.

In a prior post on X (formerly Twitter), BitGo CEO Mike Belshe stated that the incident was unrelated to BitGo. He continued, noting that the real victims in this situation are Fortress’ clients, who deserve a comprehensive understanding of the events and are not at fault.

According to Purcell, the CEO of Fortress Trust, BitGo had also expressed interest in acquiring his business. In a statement to Fortune, he said, “As you’ve seen from his unfavorable tweets, Mike Belshe has chosen to breach our NDA and essentially complain about my decision not to sell the trust company to him.”

Time will tell if this presents another opportunity for BitGo.

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