Financial technology firm Ripple has decided to cancel its acquisition of Fortress Trust, a move that has sent shockwaves through the financial and cryptocurrency industries. Ripple CEO Brad Garlinghouse announced the unexpected decision on September 28, just days after the initial acquisition announcement on September 8. The decision comes in the wake of a significant security breach involving a third-party analytics vendor that impacted Fortress Trust.
In a surprising turn of events, Ripple, the San Francisco-based fintech company known for its digital currency XRP, has opted to abandon its plans to acquire Fortress Trust. Ripple CEO Brad Garlinghouse took to X (formerly Twitter) to deliver the news, revealing that Ripple has chosen not to proceed with the acquisition. Despite the canceled acquisition, Ripple will continue to maintain its status as a shareholder in Fortress Trust’s parent company, Fortress Blockchain Technologies.
Ripple’s announcement and subsequent security incident
The initial announcement of acquisition of Fortress Trust on September 8 caught many off guard, including insiders within both companies. The acquisition was part of Ripple’s broader strategy to expand its pool of licenses in the United States and diversify its portfolio of investments. Alongside the acquisition, the Company had expressed intentions to invest in other entities within the Fortress group, including FortressPay, an affiliated firm.
However, just days after the acquisition announcement, Fortress Trust disclosed that the decision had been rushed due to a serious security incident involving a third-party analytics vendor. Fortress CEO Scott Purcell revealed that the company had suffered substantial losses in the attack, estimated to be between $12 million and $15 million. The majority of the funds lost were in Bitcoin, with smaller amounts in USD Coin and Tether.
The Company, which had been an investor in Fortress since its seed round in 2022, found itself in the position of having to step in to reimburse affected customers and make them whole.
As Ripple continues to engage in a high-profile legal battle with the United States Securities and Exchange Commission (SEC) over the classification of its XRP token as a security, the decision to abandon the Fortress Trust acquisition carries significant consequences. The failed deal opens the door for other companies with ties to Fortress to potentially benefit from the situation.
One such company is Swan Bitcoin, which was in the process of forming a joint venture with BitGo to establish a Bitcoin-only trust company in the United States. This venture was pending regulatory approval and was closely tied to Fortress Trust, which provided custody of records for Swan. With the dissolution of the Ripple-Fortress Trust deal, Swan Bitcoin will no longer be involved in Ripple’s business activities within the country.
