Coinbase Shwoing Interest in FTX Europe for Derivatives Business

As per the latest report from Fortune Magazine, crypto exchange Coinbase (NASDAQ: COIN) pursued the acquisition of FTX’s European entity to expand its footprint in the derivatives business, following the November 2022 bankruptcy.

Although the talks never materialized, Coinbase’s interest in FTX Europe highlights the exchange’s push into the derivatives market to push further its global business plan.

Based on financial records from FTX Europe, the platform continued to onboard tens of thousands of users even amid its parent company’s bankruptcy, reports Fortune. The license’s enduring value, which could only be transferred through an acquisition, attracted attention from multiple potential buyers. Consequently, the FTX debtors’ estate decided to auction various components of what was once Sam Bankman-Fried’s powerful empire.

Messages reviewed by Fortune indicate that Coinbase showed interest in acquiring FTX Europe, both shortly after FTX’s bankruptcy in November 2022 and as recently as early September 2023, when a European executive from Coinbase inquired about the feasibility of such an acquisition. However, it’s worth noting that Coinbase has since abandoned its pursuit of this potential deal, as confirmed by an individual familiar with the discussions.

Regulatory limitations in the US have kept the crypto derivatives trading market in uncertainty. As a result, Coinbase has been working on launching an offshore derivatives exchange focusing on the Asia market. Besides, Coinbase is also advocating a campaign to bring more clarity to the US crypto market.

Previously, Coinbase has made active acquisitions in the derivatives space, such as the futures exchange FairX. “We’re always evaluating opportunities to strategically expand our business and meet with many teams around the world,” a Coinbase spokesperson said.

Fortune previously reported that potential suitors for FTX Europe included Crypto.com, as well as FTX FDM, the Bahamian entity of FTX currently being overseen by liquidators appointed by the country’s Supreme Court.

FTX Europe Becomes the Flash Point

FTX Europe came into existence by acquiring Digital Assets DA AG back in 2020. Despite FTX Europe’s added healthy profits, it still came within the crossfire of the bankruptcy estate.

In July, the FTX debtors, led by former Enron executive John Ray III, initiated a legal action to recover hundreds of millions of dollars from FTX Europe’s leadership. The estate claimed that the initial acquisition had been a highly detrimental business move, effectively spending $376 million to acquire a $2 million operating license.

While FTX Europe has garnered interest from major cryptocurrency companies in recent months, the debtors’ estate has argued that an acquisition is not currently feasible. In a statement shared with Fortune in July, a spokesperson stated “The FTX debtors’ professional advisors have concluded that there is no realistic possibility of a sale.”

However, the recent expressions of interest by Coinbase and Trek Labs, have added complexity to the bankruptcy estate’s position as it continues to consider offers. According to an individual with knowledge of the situation, the deadline for a proposed sale has been extended from September 17 to September 24, potentially leaving room for an acquisition.

In a statement shared with Fortune on Thursday, a spokesperson for the FTX Debtors expressed their commitment to maximizing the value of FTX’s assets to benefit customer recoveries

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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

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