Author: Nancy, PANews
The disappearance of nearly $200 million worth of Solana tokens has drawn attention to FalconX, a cryptocurrency broker and the world’s first CFTC-registered cryptocurrency swap dealer.
Nearly $200 million worth of SOL returned to its original owner, but crypto reconciliation risks raise concerns
In 2021, about 1.35 million SOL tokens were transferred to FalconX's wallet without any identity information. In the past three years, this part of the tokens once fell to about $13 million due to the collapse of FTX. Now, due to Solana's strong recovery, its value has exceeded $190 million. Binance is the "owner" of this huge amount of money.
According to Coindesk, the FalconX wallet received 1.35 million SOL three years ago, but there was no clear information about the remitter in the transaction records, and no relevant claimant appeared immediately. At that time, the price of SOL was about US$20 to US$30.
FalconX also confirmed in an interview that there were "reconciliation anomalies" in the SOL tokens it held. The company has checked the accounts with exchanges, customers and partners, but no one showed relevant transaction records.
Recently, Binance, an important liquidity partner of FalconX, has come forward to ask FalconX to return the funds. At present, FalconX has returned 1.35 million SOL to Binance, but has not made any further explanation for the failure to track these funds over the years. It only stated that its customers will never face the risk of losing funds due to this situation, and if these assets are not found, Binance will bear the loss itself.
While reconciliation issues also occur in the traditional financial sector, the lack of regulation has also caused the community to worry about accounting systems and controls in the crypto space.
Raised over $400 million in 5 rounds of financing in 2 years and is looking for acquisition opportunities
As the protagonist of this crypto reconciliation incident, Binance's main crypto broker FalconX has actually been established for more than seven years. It is a cryptocurrency brokerage and digital asset trading platform focusing on blockchain, cryptocurrency and financial technology.
The company was founded by Raghu Yarlagadda and Prabhahar Reddy. Raghu Yarlagadda was the chief product manager at Google, responsible for providing support for the Chrome browser and leading the Chromebook revenue to more than US$3 billion. He was once selected as one of the top 25 CEOs in the encryption field and twice won the prestigious Goldman Sachs Builder and Innovator Award; Prabhakar Reddy holds an MBA from Harvard Business School and has worked at AccelPartners, a well-known Silicon Valley venture capital firm.
FalconX's business is very diverse, including providing diversified market tools such as primary liquidity, derivatives, financing, direct market access, ETF solutions, foreign exchange trading and Prime Connect. This year, FalconX has launched multiple products targeting market demand, such as tokenized Treasury fund transactions to meet investors' increased interest in securities issued by the US government, acting as a shadow bank to provide short-term loans to hedge funds and other cryptocurrency investors and charging an annual interest rate of up to 25% in the process. So far, according to the official website of FalconX, the company has more than 600 cooperative institutional clients, and has processed more than US$1.5 trillion in trading volume to date, allowing customers to access 94% of global spot and derivatives liquidity in one stop.
FalconX has considerable revenue under multiple business lines. According to Raghu Yarlagadda's latest interview with Bloomberg, FalconX's second-quarter revenue hit a record high, up 2.5 times from the same period last year, especially derivatives trading revenue, which increased nearly 3 times, but he refused to disclose specific figures. At the same time, Raghu Yarlagadda also revealed that the company is actively exploring potential acquisition opportunities, mainly for high-quality small companies focusing on institutional infrastructure, data and analysis, tokenization, and expanding its trading team in 2025, and evaluating related industries and key players therein.
During its establishment, FalconX received five rounds of financing in about two years, with a cumulative amount of at least US$420 million and a valuation of US$8 billion. The investment lineup includes Singapore Sovereign Wealth Fund, Tiger Global, Thoma Bravo, Altimeter, Coinbase Ventures and B Capital. FalconX also participated in the investment of some encryption projects, including Safe, Bitlayer, Syndicate, Elixir and Kemet Trading.
However, FalconX also encountered challenges of compliance and the collapse of the FTX platform during its development.
In May this year, the U.S. Commodity Futures Trading Commission (CFTC) filed charges against FalconX, accusing it of improperly promoting customers' transactions on digital asset exchanges and directly trading futures and swaps through sub-accounts of crypto exchanges such as Binance. This is also the first time the CFTC has taken action against unregistered futures commission merchants. As a condition of the settlement, FalconX will pay a fine of more than $1.7 million in addition to voluntarily changing the way it collects customer information and updating its KYC policy.
For another example, due to cooperation with liquidity providers such as FTX, FalconX has previously revealed that it has financial risk exposure related to FTX, with 18% of the company's disposable funds trapped in FTX, but the company's capital is still sufficient, with decades of operating budgets and a debt-to-equity ratio as low as 4%. Perhaps out of asset risk warnings brought about by FTX's bankruptcy, FalconX also launched Prime Connect, an anti-bankruptcy settlement solution for trading platforms, this year, allowing institutional investors to trade on the trading platform while their assets are stored in regulated custody services, thereby reducing counterparty risks.
