Ripple has decided to reverse its planned acquisition of Fortress Trust, a subsidiary of Fortress Blockchain Technologies that offers wallet and payment services. Less than a month after announcing its intention to acquire the wallet and payment service provider, Ripple has chosen to back out of the deal.
Brad Garlinghouse, the CEO of Ripple, said on X (formerly Twitter): "A few weeks ago, we signed a letter of intent to acquire Fortress Trust, we've since made the decision not to move forward with an outright acquisition, though Ripple will remain an investor in Fortress Trust."
Ripple's Planned Acquisition Strategy
This strategic acquisition was an essential step towards enhancing Ripple's regulatory licenses and bolstering its infrastructure capabilities, particularly in the blockchain and cryptocurrency payments solutions sector. As Ripple continues to grapple with its ongoing legal dispute with the US Securities and Exchange Commission (SEC), the acquisition aimed to position the company as a trusted brand for enterprises, Finance Magnates reported.
One key development that may have contributed to Ripple's decision was a recent security incident involving Fortress Trust. A few days after Ripple's initial announcement, Fortune Magazine reported that Fortress Trust had suffered losses ranging from USD $12 million to USD $15 million due to a cryptocurrency hack. Scott Purcell, the Founder and CEO of Fortress Trust, revealed that only a small fraction of their customer base, specifically "four customers out of 225,000 customers" were affected.
In response to these reports, Purcell clarified to Bloomberg that the security breach had targeted a third-party service rather than Fortress Trust. He emphasized that Fortress Trust had not been directly hacked and stated: "6 out of Fortress' 250,000+ customers used it to log into their accounts."
Ripple Maintains Investment in Fortress
However, Ripple's change of plans did not disrupt the relationship between Ripple and Fortress. Garlinghouse emphasized the company's long-standing relationship with Fortress Blockchain Technologies. He praised Fortress Trust for building a robust business with recurring revenue and a substantial customer base, including crypto-natives and newcomers to the crypto industry.
The Fortress team is incredibly talented, and has built products solving real customer problems. While this outcome is different from what was originally planned, we’ll continue to support them and hope to work together in the future!
— Brad Garlinghouse (@bgarlinghouse) September 28, 2023
Fortress Trust holds a Trust license in Nevada, which was anticipated to add to Ripple's existing licenses (a BitLicense in New York and more than 30 Money Transmitter licenses across the United States). These licenses were expected to position Ripple as a trusted and reliable partner for enterprises, especially given the ongoing legal challenges with the SEC.
Last month, Judge Analisa Torres granted the SEC's request to proceed with an appeal, challenging a previous court ruling that determined Ripple's sale of XRP cryptocurrency on a digital asset exchange did not breach securities regulations. This development sets the stage for the SEC to present its case for an interlocutory appeal, further prolonging the legal dispute.
This article was written by Jared Kirui at www.financemagnates.com.
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