Scott Purcell, the founder and CEO of Fortress, a crypto custodian, has resigned from his position at the company. Purcell is already involved in a new startup, as indicated on his LinkedIn profile.
This decision follows a recent hacking incident in September, resulting in the loss of $14 million to $15 million in customer funds. Despite this setback, Ripple, the blockchain firm behind XRP, stepped in to reimburse affected clients.
Fortress also underwent layoffs, letting go of at least six employees, primarily from its sales department. Confirming his departure, Purcell revealed that Rich Hauschild, former COO of iTrustCapital, would assume the role of CEO. Purcell will continue as a board member of Fortress’s parent company.
Purcell’s history in the digital asset space includes being the former CEO of Prime Trust, a crypto custodial service that faced financial challenges, leading to bankruptcy in August. Fortress, founded by Purcell in October 2021, faced a significant setback when hackers stole millions of dollars’ worth of crypto assets over the summer.
Before the public acknowledgment of the hack, Ripple had announced plans to acquire Fortress. The acquisition aimed to enhance Ripple’s regulatory licences and infrastructure capabilities. However, the hacking incident and broader internal issues led to a change in plans.
Ripple abandoned the acquisition in late September, with Purcell noting that a subset of Ripple staff was not interested in diversifying to consumer-focused products. Contrary to rumours, Ripple clarified that the decision was not influenced by how Scott Purcell handled the hacking incident. Ripple will retain its investment in Fortress despite backing out of the acquisition.
Despite the failed acquisition, Ripple has not demanded immediate repayment of the funds it provided to Fortress to compensate customers. Purcell emphasised that neither party is overly concerned about this situation.
The planned acquisition of Fortress Trust was part of Ripple’s strategy to strengthen its regulatory position amid an ongoing legal dispute with the US Securities and Exchange Commission (SEC). Ripple intended to leverage Fortress Trust’s Nevada trust licence to enhance its credibility in the industry.
The decision to abandon the acquisition may have been influenced by a security incident at Fortress Trust, where losses of $12 million to $15 million occurred due to a cryptocurrency hack. Ripple’s change of plans, however, did not affect its longstanding relationship with Fortress Blockchain Technologies.
Fortress Trust faced a security incident, leading to losses, and there were conflicting statements regarding the nature of the hack. While Fortress insisted it was a third-party vendor’s compromise, Ripple contested this characterization. Ripple asserted that it quickly stepped in to make affected customers whole, contradicting claims that Fortress was not directly hacked.
Scott Purcell, in response to the incident, clarified that no customers had lost any assets and that Fortress had used its balance sheet to cover most customers. He directed criticism at BitGo CEO Mike Belshe, alleging violation of a non-disclosure agreement and spreading misinformation.