Written by Mitchell Martin , Forbes Team
What do you do as a reformer after running the New York Stock Exchange for five years? For Tom Farley, the answer is to dive into the world of cryptocurrencies.
Last month, CoinDesk, a leading digital asset news site, announced that it had been purchased by cryptocurrency exchange Bullish, where Farley currently serves as CEO. A day later, Farley confirmed to CNBC that his penny stock was also a potential buyer of FTX. Asked what would happen if Bullish acquired shares after bankruptcy, Farley said: “I have limited contractual ability to say anything.” But look, we're on the sidelines with FTX.
Farley, who declined interview requests from Forbes , appears to prefer incognito mode when it comes to corporate disclosures. After unsuccessfully trying to integrate its acquisition of Far Peak with Bullish via a specialist buyout firm in 2022 in a $600 million deal, Farley resigned as CEO in early May 2023 without a public announcement. Bullish did not respond to requests for information about how and under what circumstances Farley was appointed, but a person familiar with the matter confirmed that his appointment had not been announced. An upbeat May 2 press release identified him as CEO, and his LinkedIn profile shows he started that month.
The failure of the SPAC deal with Far Peak Acquisition would have provided the stock market with about $840 million in new capital and made Farley an optimistic CEO. SPAC shareholders and related investors were expected to own about 9% of the enlarged company but less than 3% of voting rights, so the exchange ended up with Farley but no Far Peak money. .
Just like FTX in the Bankman-Fried era, Bullish insists it is “regulated and compliant.”
Two SPAC executives have also joined Bullish: David Bonanno, formerly Far Peak's CFO and now the exchange's chief strategy officer, and Sarah Stratoperda, vice president of the investment vehicle and head of advertising development.
While the details of Farley's C-suite membership remain murky, the failure of his SPAC is no secret, said Christy Marvin, founder of SpacInsider.com, pointing to hundreds of SPACs that never did. Acquisitions after a market crisis. He sells. Another high-profile cryptocurrency SPAC deal, which was set to acquire USDC stablecoin developer Circle, was abandoned on December 5.
Despite trusted supporters like Farley, Marvin believes SEC Chairman Gary Gensler resented the deal. “Gensler had a number of areas of interest,” he says, including “the cryptocurrency market and another market in SPACs.”
After rising to the top of the uptrend without the help of a SPAC, Farley focused on consolidating the gains of his new business. In September, Bullish paid for a glowing profile of Farley in the Wall Street Journal, which touted the future of cryptocurrencies and how Bullish was taking the lead with a “follow the rules” approach.
“Driven by a strong commitment to adhering to regulatory and compliance standards, Bullish aims to enhance the integrity of the cryptocurrency market,” the profile reads. “The digital asset exchange has already achieved key milestones that indicate a more mature business model for institutional cryptocurrency trading.”
Bullish says it has handled more than $300 billion in trading volume since it began operating in November 2021 and that it "consistently ranks among the top three exchanges globally in terms of spot trading volume for Bitcoin and Ether," citing data from Coin Metrics. Coin Metrics representative Jamie Lovegrove added that the volume numbers are reported by the exchange's own software and have not been independently verified. In fact, according to CoinGecko, Bullish's “normal trading volume,” which supposedly represents the fake trades endemic to cryptocurrency exchanges, is only about $40 million over the past 24 hours, compared to $1.2 billion in the same relationship. Over the past three months, Bullish has reported an average daily trading volume of over $700 million, but CoinGecko data suggests it rarely exceeds $40 million.
Just like FTX in the Bankman-Fried era, Bullish insists it is “regulated and compliant.” Bullish, which does not operate in the United States, is regulated by the Gibraltar Financial Services Commission. FTX is also regulated by the island nation's body, the Bahamas Securities Commission.
“If Tom or anyone else wanted to work in this field, I would say: Do it within the law.”
In his paid article in the Wall Street Journal, Bullish says that, unlike other digital asset exchanges, it is controlled by a major accounting firm, Deloitte & Touche. However, there is no link to the promised audited financial reports on the stock exchange website under the title of trust and transparency.
Short bullish history. Founded in 2021 as a subsidiary of Block.one, the blockchain software company is backed by a group of billionaire investors including PayPal co-founder Peter Thiel, hedge fund managers Alan Howard and Louis Bacon, and Hong Kong tycoon Richard Thierry. .
Prior to commencing operations, Bullish entered into an agreement with Farley's Far Peak and others in July 2021 to invest approximately US$840 million in exchange for a 9% stake in the company, representing an asset value of US$9 billion. This maneuver would have made it much easier for Bullish to gain publicity than the traditional route of going public, which would have been more expensive and required more SEC oversight.
Unlike Coindesk and Binance, Bullish focuses exclusively on institutional investors, offering about two dozen major cryptocurrencies, most of which trade only against the stablecoin USDC, according to its website. The exchange has been offering spot and margin trading as well as perpetual futures contracts on Bitcoin and Ethereum since December 7. Perpetual contracts allow investors to take positions on future prices without specifying expiration dates, as is the case with traditional commodity contracts. Farley is no doubt hoping to benefit from the SEC's approval of a Bitcoin exchange-traded fund, which will likely open the door to institutions investing in the digital asset.
The terms of Bullish's purchase of CoinDesk from Digitalency Group were not disclosed. The Wall Street Journal reported in July that the previous sale to a group of investors led by Matthew Roszak of Tally Capital and Peter Visenis of Capital 6 would have had an enterprise value of $125 million and that CoinDesk would have generated $50 million in revenue in 2022.
Announcing the new deal, 48-year-old Farley was quoted as saying: “Bullish will immediately invest capital in several of CoinDesk’s most exciting growth initiatives, launching new services, capabilities and products.” » Details were not disclosed, but the company said that current leadership of CoinDesk will be retained.
One thing Farley brings to Bullish is impressive credentials. The son of a prominent U.S. Court of Appeals judge, Farley attended the prestigious Gonzaga College High School in Washington, D.C., where he was a baseball star and later played for Georgetown. In 1997, he completed his studies in political science. Farley was tall and boyish in appearance. He spent time in investment banking, private equity and risk management before moving to the Intercontinental Exchange as president of ICE Futures US, the commodities exchange formerly known as New York. York Chamber of Commerce. In May 2012, he became Senior Vice President of Financial Products at ICE.
When ICE bought NYSE Euronext for $11 billion in November 2013, Farley was appointed COO of the NYSE under CEO Duncan Niederauer. Six months later, Niederauer retired and Farley replaced him with the title of president. Farley distinguished himself as chairman of the New York Stock Exchange, where he was able to network with executives, institutional investors and Wall Street clients, and was often seen at events such as the World Economic Forum in Davos.
One thing that caught Farley's attention while on the big board was encryption. Under his leadership, the exchange created a Bitcoin index and invested in private equity in what was then a Bitcoin wallet called Coinbase. The NYSE was one of at least 10 investors in a $75 million investment round, and ICE has leveraged its more than $1.2 billion stake in 2021.
In the spring of 2018, Farley discovered the SPAC loophole and decided to start his own venture. He assumed his SPAC would be different: If investors decided to cash out once they identified a target, as they sometimes do, his company would have a buyer for the stock. Farley turned to his contact list for help on the matter, telling Axios at the time: “I called Dan Loeb, who I've known for years, and asked him to provide a $400 million safety net.” expertise. He said yes and here we are.
Teaming up with Loeb's venture capital firm Third Point, new SPAC acquisition firm Far Point has agreed to raise $400 million to acquire a fintech company. The prospectus stressed that Farley's experience was critical to the success of the deal: "We believe that the deep relationships Mr. Farley has gained as Chairman of the New York Stock Exchange Group, as well as his extensive operational experience in financial technology and capital markets, will be a good fit for us." Helps.” Identify and achieve an interesting body of work.
It's been a bumpy road due to the COVID-19 pandemic, but the SPAC eventually succeeded. In August 2020, Far Point invested in Swiss company Global Blue, which provides services to retailers dealing with foreign tourists, including sales and VAT refunds for visitors to stores operating outside free zones such as airports. The SPAC and allied investors committed about $1 billion to acquire about 58% of Global Blue, and Farley eventually became chairman, with Global Blue CEO Jack Stern retaining his position. After a string of losses that coincided with the pandemic, the company turned a profit in three of the last four quarters and revenue reached $123.2 million in the three months ending in September, compared to $141.5 million in the previous quarter, according to YCharts. From last year. 2019, but compared to just $14.5 million as the pandemic suppressed activity in the third quarter of 2020.
That gave Farley hands-on experience managing a SPAC deal, but he didn't have a company to run yet. A year after the deal closed, he returned with a new SPAC, Far Peak Acquisition, with the same name and a new target, Bullish.
While the FTX brand may be of questionable value to Bullish or anyone else, the once top-tier cryptocurrency exchange has a valuable customer database estimated at 9 million. Its other assets include a variety of cryptocurrencies that have seen a strong rise in the cryptocurrency markets. According to a recent analysis by Forbes, FTX's digital assets, including Solana and Bitcoin, along with other securities, are expected to account for most, if not all, of the $15 billion the company owes retail clients.
One asset that hasn't shown much life since FTX's bankruptcy is its FTT loyalty card, which now has bankruptcy assets of about $260 million, according to Arkham Intelligence and Nansen. After reaching a record high of over $84 in September 2021 and a market capitalization of over $9.3 billion, FTT fell to around $25 in the days before the stock market crash and then declined until the end of 2022 at less than $1 US. As of mid-August 2022, it was still close to that level. After reports that Bullish and other companies were examining FTX's activities, the price rose to nearly $5, adding about $1 billion to the stock's declining value.
The idea that FTX could be revived by Farley has received mixed blessings from Gary Gensler. “If Tom or anyone else wanted to work in this industry, I would say: Do it within the law,” the SEC chief said, as reported by CNBC on Nov. 8. “Build investor confidence in what you're doing. Do that and make sure you provide the right information and also don't mix all these functions together to the detriment of your clients. Or use their crypto assets for your own purposes.”