Michael Bodley

Beset by an eight-figure hack, the operations of institutional crypto prime brokerage Floating Point Group (FPG) were on the brink on Friday, according to two sources familiar with the matter.&nbsp;



In the near-immediate aftermath of the hack, which resulted in the loss of a preliminary estimated $15 million to $20 million in cryptocurrencies, FPG moved to shutter its trading activities, the company <a href="https://twitter.com/fpgcrypto/status/1669048609000816640">said</a> via Twitter on June 14.



Both sources claimed that around that same time, the US-based FPG parted ways with a significant number of staffers — a move evidently designed to buffer the firm’s balance sheet as the business dealt with a standing loss of the entity’s core trading revenues.



Those layoffs mounted to a figure encompassing virtually all of FPG, apart from the company’s core team, including its founding members, both sources said. One source said as much as 90% of staffers were let go.



Both sources, who were granted anonymity to discuss sensitive business dealings, said the expectation among FPG’s counterparties is that it would close down. But an unwinding could also take the form of an acquisition, or an outright purchase, of some or all of FPG’s apparently distressed assets, extending to the company’s tech stack.



Asked whether FPG was shutting down, John Peurifoy, the startup’s chief executive and co-founder, told Blockworks on Friday that “we don’t know yet, genuinely.”



Nine in 10 staffers let go was too high of a figure, according to Peurifoy, who said the “majority” of employees were no longer with the company, but declined to specify exact numbers.&nbsp;



Several staffers who survived an initial round of cuts following the June exploit were let go a couple of weeks later, one source said. One possible explanation is that FPG was keeping them on the payroll in a bid to drum up any interest in a round of emergency financing to get the business back on track — or to entice a possible purchaser. FPG executives have been speaking to a number of potential outside investors since the incident, though there is no indication those talks have amounted to much.&nbsp;



Complicating any kind of outside deal is the fact that FPG’s hack had yet to be resolved, at least publicly. Its perpetrators were not identified, with FPG referring to the breach as a “cyber security incident.”&nbsp;



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">1/5 On Sunday, we experienced a cyber security incident. Upon discovery, we locked all third party accounts and migrated and secured all wallets until we better understand the scope and circumstances of this incident.&mdash; Floating Point Group (@fpgcrypto) <a href="https://twitter.com/fpgcrypto/status/1669048609000816640?ref_src=twsrc%5Etfw">June 14, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The company said it had alerted law enforcement to the breach when it became aware of it, going on to work with “the FBI, the Department of Homeland Security, our regulators, and Chainalysis to understand how this occurred and to recover assets.”



On its website, FPG touted its trading customers, including crypto hedge funds, as having more than $50 billion in assets. It listed its DeFi vault, which routed customer assets to a range of trading platforms, including Maker, Lido and Uniswap.



Declining to comment on the ongoing investigation or the prospects of raising additional capital, Peurifoy said the company is “in a holding period right now.”



“I genuinely don’t know what the future of the organization is and what we want to do with it…we effectively, right now, are leaving avenues open,” he said. “We’re still having conversations with people…going through a lot of discussions, exploring several different routes.”



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Floating Point up against wall following $20M hack

Ben Strack

<div id="highlights-block_6305da3019f27" class="highlights">
 <ul>
 <li>Peter Eliades says he looks to expand on Floating Point Group’s existing presence across 50 institutional accounts </li>
 <li>The executive spent the last three years as head of electronic sales and trading at Wells Fargo</li>
 </ul>
 
</div>



A traditional finance (TradFi) veteran with more than two decades of experience at bulge-bracket banks JPMorgan and Wells Fargo is jumping into crypto.



Digital assets prime brokerage <a href="https://www.floating.group" target="_blank" rel="noreferrer noopener">Floating Point Group</a> has tapped <a href="https://www.linkedin.com/in/peter-eliades-38a8978/" target="_blank" rel="noreferrer noopener">Peter Eliades</a> — who last headed electronic trading sales for Wells Fargo — to oversee business development in the US and throughout Asia Pacific.&nbsp;&nbsp;



Eliades told Blockworks that the influence of cryptocurrency across “traditional media, sports, sponsorship [and] gaming” has become “increasingly evident.” The growing influence of digital assets in traditional spheres “by extension woke [Eliades] to the possibility of exploring something new and innovative,” he said.&nbsp;



The executive’s focus on crypto stemmed from investing personal capital in a bid to “learn more about the benefits of digital markets and their pain points.”



Eliades was a vice president at Lehman Brothers in 2001,&nbsp; before becoming a managing director at Bear Stearns &amp; Co. about four years later. He went on to work for JPMorgan as head of Americas trading before joining Wells Fargo, and now looks to make a splash in crypto.



&#8220;[Eliades] has built world-class electronic trading businesses for decades and understands the role that crypto will play in shaping the future of global financial systems,” Floating Point CEO John Peurifoy said in a statement.


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><img loading="lazy" decoding="async" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg" alt="" class="wp-image-28959" width="273" height="410" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=683 683w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=200 200w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=1365 1365w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=171 171w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=174 174w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=146 146w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=53 53w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=33 33w, https://blockworks-co.imgix.net/wp-content/uploads/2022/08/Pete-Eliades-683x1024.jpg?w=1707 1707w" sizes="(max-width: 273px) 100vw, 273px" /><figcaption>Peter Eliades, Floating Point&#8217;s new hire</figcaption></figure></div>


Joining Floating Point was a particularly easy transition, he added, as Eliades has consulted for the company since 2018. The firm was founded that year and is backed by firms including Coinbase’s venture arm, Naval Ravikant and Tribe Capital.



Eliades said he is focused on helping Floating Point earn client trust and establish itself as “critical subject matter experts who help bridge the gap between crypto-natives and TradFi firms.”&nbsp;



He highlighted the company’s global execution desk that can handle flexible order instructions and execute on a customer’s behalf. Though common in TradFi with equity and options markets, Eliades said, such capabilities are still fairly elusive in crypto.&nbsp;



“We see it as our first touch point to help bring asset managers into the space and it&#8217;s the service they’re all looking for first before they get more complicated with their operations,” the new head of distribution said.&nbsp;&nbsp;



The hire of Eliades comes after the company revealed the <a href="https://www.prnewswire.com/news-releases/floating-point-group-releases-flowvault-a-cryptocurrency-settlement--transfers-platform-for-exchange-based-trading-301559304.html" target="_blank" rel="noreferrer noopener">launch of FlowVault</a> in June. The service offers a console- and API-based management of assets across exchanges via a single account.



“That gives us a really exciting springboard to branch out into giving them the same smooth secure access into DeFi and other critical partnerships with trading solutions and OTC liquidity aggregators,” the executive added. 



“[This allows] clients to not only see and manage their assets but also trade, stake, store and leverage across the many options that are opening up to our crypto world.”



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Crypto Prime Brokerage Enlists Former Wells Fargo, JPMorgan Exec

<div id="highlights-block_61e87c8091e63" class="highlights">
 <ul>
 <li>The acquisition and integration of Omniex will help simplify the experience for institutional investors looking to go deeper into crypto, the company said</li>
 <li>Gemini announced the acquisition of digital asset portfolio management platform BITRIA last week</li>
 </ul>
 
</div>



Less than a week after announcing its acquisition of digital asset portfolio management platform BITRIA, crypto exchange <a href="https://www.gemini.com/" target="_blank" rel="noreferrer noopener">Gemini</a> has bought trading technology platform <a href="https://omniex.io/" target="_blank" rel="noreferrer noopener">Omniex</a>.&nbsp;



Founded in 2017 by former State Street executives, Omniex provides order, execution and portfolio management system solutions for institutional crypto trading.



The acquisition and integration of Omniex into Gemini&#8217;s existing institutional custody, clearing and trading solutions simplifies the experience for institutional investors looking to go deeper into crypto, said Dave Abner, Gemini’s global head of business development.



Specifically, the integration will provide a single point of access to multiple exchanges and OTC liquidity sources, tools and algorithms to ensure trade transparency, and a trading experience with application programming interface (API) connectivity, according to Gemini’s <a href="https://www.gemini.com/blog/gemini-acquires-trading-technology-platform-omniex-launches-gemini-prime" target="_blank" rel="noreferrer noopener">Wednesday announcement.</a>&nbsp;&nbsp;



The buy allows Gemini to publicly launch a crypto prime-brokerage offering, <a href="https://www.gemini.com/prime" target="_blank" rel="noreferrer noopener">Gemini Prime</a>, which select clients have been using over the past year. The product’s full rollout is slated for the second quarter.



The Omniex team will be joining Gemini to expand and drive platform capabilities for the prime services division.



Gemini is seeking to build out its institutional business with crypto solutions that resemble offerings within traditional finance, Abner told Blockworks. 



The company announced <a href="https://cms.blockworks.co/gemini-now-a-one-stop-shop-for-advisors-after-bitria-buy/" target="_blank" rel="noreferrer noopener">its purchase of BITRIA</a> last week. That acquisition allows financial advisors to gain exposure beyond the closed-end funds and spot ETFs focused on the largest tokens, Abner previously noted.



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Gemini Acquires Crypto Trading Tech Platform Omniex

Tanaya Macheel

<div id="highlights-block_6074a76337bcc" class="highlights">
 <ul>
 <li>Compared to traditional prime brokerages, crypto providers’ exchanges operate as separate units</li>
 <li>Traditional prime services providers may not be going anywhere anytime soon</li>
 </ul>
 
</div>



Even with more and more<a href="https://cms.blockworks.co/crypto-prime-brokerages-look-to-bundle-services-to-meet-growing-institutional-demand/" target="_blank" rel="noreferrer noopener"> new crypto prime brokerage options</a> on the market, traditional prime services providers may not be going anywhere anytime soon.&nbsp;



Compared to traditional prime brokerages, crypto providers’ exchanges operate as separate units with their own order books and prices. That means investors need to onboard at various different platforms and fund their accounts on each of them, which some in the traditional world might see as costly and inefficient.



“The way that the crypto market works is different from a traditional space,” said Michael Shaulov, CEO and co-founder of <a href="https://cms.blockworks.co/fireblocks-raises-133m-to-scale-custody-platform-double-headcount/" target="_blank" rel="noreferrer noopener">Fireblocks</a>, who spoke at an online event on Thursday hosted by CryptoCompare and BlockFills. “We rely on DTCC or on other market functions that will provide centralized clearing by the finish. The way the [crypto] market operates (and Binance.US is a great example), if Binance needs to operate one leg which is an institutional flow but on the other leg it has retail users that can withdraw those funds at any point in time, the market structure needs to be different.”



While Shaulov said the market is pivoting and prime services providers are trying to provide the services that allow institutional firms to take advantage of what the digital asset market has to offer, not everyone will, according to Lory Kehoe, director of digital assets and blockchain for BNY Mellon (which uses Fireblocks technology for its <a href="https://cms.blockworks.co/bny-mellon-digital-assets-are-coming-of-age/" target="_blank" rel="noreferrer noopener">digital assets custody service</a>).



“Traditional prime brokerage services aren’t going to go away,” Kehoe said during the online event. “There’s still a definite requirement for them. It&#8217;s also going to take some time for regulatory clarity to come through. I expect what we&#8217;ll see is some will pivot successfully and provide services in the crypto space as well as in the traditional space, and some won&#8217;t make that pivot.”



<h3 class="wp-block-heading">Fragmented liquidity and trading</h3>



One reason digital assets trading is so retail dominated is because of the fragmentation of liquidity and trading across geographies and exchanges, according to another member of the online event, Neil Van Huis, partner and director of trading at BlockFills, an institutional digital asset liquidity <a href="https://blockfills.com/">provider</a>.



Prime brokerage in digital assets might look different from prime brokerage in the traditional world in that the crypto community has no problem letting trades settle at the end of the day. “That&#8217;s just something that seems normal to us,” he said.



Trading on an exchange, by contrast, changes the participants with whom you&#8217;re interacting.&nbsp;



“If you want to go and do an institutionally focused trade on a predominantly retail-focused exchange, that is going to be a difficult thing to do, unless you can have a prime services arm that essentially provides credit to everyone that&#8217;s been involved in this type of transaction,” Van Huis said. “That’s typically very costly. It&#8217;s not a capital efficient thing to do.”



BlockFills is trying to disrupt the traditional futures clearing model by creating an ecosystem that focuses on institutional participation so capital efficiency is easier to handle, Van Huis said. It’s building a set of technology, products or services that allow institutional participants to do “about as much as they&#8217;d like to do in the space in a seamless and compliant manner.”



“If you can use blockchain technology from companies like Fireblocks, and you can work with custodians and banks like BNY Mellon, to accomplish some of the things that you&#8217;re doing with other institutionally minded folks that are providing liquidity in your ecosystem, you can actually achieve a result that we&#8217;re talking about,” Van Huis said.



<h3 class="wp-block-heading">An institutional force</h3>



The digital asset industry was largely retail led until about 2019, and there&#8217;s a strong institutional force coming through now.



Binance.US has more retail flow than any other exchange because it has the lowest price point in the US, according to Rena Shah, head of operations and business development at Binance.US, who was also on the event panel. It is, for many, their gateway into digital assets.



“We are getting our first entrance of people doing the first couple hundred, couple thousand dollars, then slowly aggregating larger positions, they want to become high frequency traders — it’s similar to a Wall Street bets situation where people are pulling their own knowledge so that they can move the market together,” Shah said.



On the flip side, she said an increasing number of entities and corporate structures have been adding digital assets to their balance sheets, and while Binance.US has take orders coming in from retail investors, institutions are on its maker side.



“It’s a really interesting ecosystem,” she said. “For once they actually get to trade against each other — it’s not an institution trading against an institution. They want these very attractive retail orders to trade against because they know that there are real people behind, moving the market.&#8221;



“[Institutions] generally prefer to come to an exchange, more so than a traditional prime brokerage because of the perspective we provide,” Shah said. “We are not a team that&#8217;s kind of touches digital assets, we&#8217;re only in digital assets. This is all that we know, this is all that we advise on and I think they kind of appreciate the unique perspective as opposed to having just a fraction.”