FTX.US acquires crypto derivatives exchange LedgerX

FTX.US, the U.S. affiliate of crypto exchange FTX, has made its first acquisition. The company has bought out crypto derivatives exchange LedgerX for an undisclosed sum.

The deal is expected to close sometime in October, FTX.US president Brett Harrison told The Block. While the deal's financial terms have not been disclosed, LedgerX is a profitable entity and has raised around $35 million in total funding to date, said Harrison.

Launched in 2017, LedgerX has had a controversial history. In 2019, the exchange's co-founders Paul and Juthica Chou were placed on administrative leave after a tussle with the U.S. Commodity Futures Trading Commission (CFTC). LedgerX, at the time, announced that it had launched a derivatives product and later had to retract its statement because the CFTC said it did not provide an amended derivatives clearing organization (DCO) license to the firm for the product. LedgerX later changed its management team and today has a DCO license, a designated contract market (DCM) license, and a swap execution facility (SEF) license from the CFTC.

Harrison said the current LedgerX team, management, and board are "all excellent, and have strong relationships with the CFTC." He went on to say that LedgerX is "the only company that has been able to launch a retail crypto options market in the U.S." LedgerX currently offers trading in crypto futures, options, and swaps for both retail and institutional clients.

Derivatives entry

"The majority of global crypto volume trades through derivatives," said Harrison, adding that FTX.US is excited to enter the regulated U.S. derivatives market through the LedgerX deal. 

Indeed, trading volumes of crypto (bitcoin and ether) futures and options have been around $23 trillion this year to date compared to crypto spot trading volumes of over $13 trillion, according to The Block Research.

The FTX.US acquisition will initially let LedgerX continue to offer its services to existing clients under its own brand. But over time, FTX.US will merge the two brands under the FTX.US umbrella and plan to offer new products, said Harrison.

"US crypto derivatives is an incredibly underserved market, and it took time and resources for us to become a regulated entity under the existing frameworks," said Zach Dexter, CEO and co-founder of LedgerX. "FTX.US has taken the view, which we share, that US regulators are ready and willing to partner on innovative products, and it's the responsibility of the industry as a whole to step up and work with agencies like the CFTC."

LedgerX's core team consists of 25 people, and all of them will continue to work with it, said Harrison. The deal's legal advisors include Sullivan & Cromwell (representing FTX.US) and White & Case (representing LedgerX), said Harrison.