For reasons best known to Ripple and CEO Garlinghouse, the deal to acquire Fortress Trust is now off despite enthusiasm shown weeks ago.
Barely three weeks after announcing its decision to acquire regulatory and tech infrastructure company Fortress Trust, Ripple is no longer interested in the deal. Ripple CEO Brad Garlinghouse made the announcement on X (formerly Twitter), specifying that the company will remain an investor in Fortress Trust.
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_io.
— Brad Garlinghouse (@bgarlinghouse) September 28, 2023
Neither Ripple nor Garlinghouse provided any further information on the decision to walk away from the Fortress acquisition. However, Garlinghouse praised the Fortress Trust team in a follow-up post and promised to continue Ripple’s support. He wrote:
“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!”
The Ripple and Fortress Deal
Ripple announced the Fortress acquisition early this month to expand its arsenal of regulatory licenses in the US. Fortress Trust has a Nevada Trust license that permits the company to custody financial assets. Ripple initially invested in Fortress Trust last year via a seed round. However, neither party announced any financial details of the investment. In addition to the regulatory expansion, an advantage of the proposed acquisition is the potential to attract investors.
Following news of the acquisition, Ripple said it would compensate the company’s customers for any losses incurred due to a recent hack. Fortress Trust was the victim of a phishing attack in which the company lost about $15 million, supposedly due to a problem from a third-party vendor. In a post on X, Fortress did not identify the vendor but confirmed that the issue stemmed from a compromise of the vendor’s cloud tools. The post also specified that the hack affected 4 Fortress customers.
According to a CoinDesk article, the unnamed vendor is a San Francisco-based software company, Retool. The article also states that the hack encouraged Fortress Trust to further its acquisition plan.
Ripple’s Legal Issues
Ripple is still grappling with the United States Securities and Exchange Commission (SEC) over a lawsuit initially filed in 2020. According to the SEC, Ripple violated federal securities laws by selling $1.3 billion worth of XRP tokens. However, a US District Judge ruled in July that XRP did not meet the requirements for classification as a security based on the Howey Test. Following the ruling, the price of XRP jumped over 70% within 24 hours to $0.7938. However, the price of XRP has since corrected. As of this writing, XRP is at $0.5088.
Following the ruling, SEC Chair Gary Gensler said he was disappointed at the court’s ruling and suggested an appeal. The Commission has since requested permission to file an interlocutory appeal but has not received permission.
Speaking in a recent interview, Ripple president Monica Long said the company’s legal problems in the US might be the push it needs for global expansion. Long said the ruling results in a great opportunity for the blockchain company to spread past the United States. However, neither Long nor Garlinghouse has provided any information on a possible expansion.
Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.
