- Ripple has backed out of its planned acquisition of financial tech firm Fortress Trust, though it will remain an investor.
- The decision follows internal disagreements at Ripple regarding business priorities and a recent security breach at Fortress.
- Despite the called-off deal, both companies emphasize a continued strong relationship with prospects for future collaborations.
Ripple suddenly announced it is retracting its plans to acquire Fortress Trust, a prominent crypto custodian and fintech firm. Ripple first disclosed its intention to acquire Fortress Trust early in September 2023. Fortress was seen as an attractive acquisition target for Ripple. As Brad Garlinghouse, Ripple’s CEO, expressed, Fortress had developed “an impressive business with recurring revenue” and a strong customer base consisting of both seasoned crypto enthusiasts and newcomers to the digital currency sphere.
However, a change in business priorities for Ripple led the company to reconsider the acquisition. Scott Purcell, CEO of Fortress, mentioned in a statement that Ripple was focused primarily on a “pure B2B and institutional global business” model. Even though the acquisition would have provided Ripple with an opportunity to diversify into the B2B2C segment, internal disagreements over strategic direction caused Ripple to back out of the potential deal.
Security Concerns Raise Eyebrows
To further complicate matters, shortly before the acquisition was made public, Fortress faced a security breach incident. The breach involved one of Fortress’s partners and resulted in unauthorized access to some of the crypto custodian’s customer accounts. Thanks to Ripple’s intervention, Fortress was able to cover significant losses for its affected clients. This incident did influence Ripple’s acquisition plans, even though discussions about a potential merger had been ongoing for months.
The security breach also stoked concerns about the transparency and safety measures implemented by Fortress. Questions arose regarding Fortress’s handling of the situation, particularly in light of its historical context. Scott Purcell, the brain behind Fortress, had previously helmed Prime Trust, a company that faced severe challenges in the past, including losing significant amounts of customer funds and regulatory interventions. This history caused some to question the wisdom of entrusting funds to Fortress in the first place.
The Road Ahead
Despite the decision to not proceed with the outright acquisition, both Ripple and Fortress emphasized their strong existing relationship and potential future collaborations. Ripple remains an investor in Fortress and continues to support the firm’s endeavors. As Ripple and Fortress’s recent experience illustrates, even firmly announced plans may change in light of new information or changing circumstances. One can only wonder what the future holds for these two major players and whether their paths will converge again down the line.