In a swift turn of events, Ripple, has decided to withdraw from its proposed acquisition of Fortress Trust, a move originally aimed at expanding its array of licenses in the United States (US).
The announcement was delivered by Ripple’s CEO, Brad Garlinghouse, via X (formerly known as Twitter).
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
He revealed that Ripple had opted not to proceed with the intended outright acquisition.
However, Ripple will maintain its status as a shareholder in Fortress Trust’s parent entity, Fortress Blockchain Technologies.
The initial revelation of this acquisition plan, which took place on 8 September, took many by surprise, even within the ranks of Ripple itself.
Today, we are announcing intent to acquire Fortress Trust, part of the @Fortress_io suite of companies. Fortress Trust’s financial and regulatory infrastructure complements and expands Ripple’s comprehensive portfolio of blockchain solutions for finance. https://t.co/LIl3cPEur2— Ripple (@Ripple) September 8, 2023
At that time, Ripple had articulated plans to extend its investments to other companies within the Fortress group, including the affiliated entity, FortressPay.
However, several days later, Fortress Trust acknowledged that the pace of the acquisition had been accelerated due to a security incident involving a third-party analytics vendor.
This incident resulted in substantial losses for Fortress, totaling between $12 million and $15 million, primarily in Bitcoin, along with lesser amounts in USD Coin and Tether.
Ripple, an existing investor in Fortress since its seed round in 2022, had to step in to reimburse affected customers.
While this security breach expedited Ripple’s plans, it is worth noting that Fortress had been in discussions about a potential acquisition for several months with multiple partners, including Ripple and BitGo.
A spokesperson from Ripple had earlier explained that Fortress had been actively seeking partners to fuel the growth of its payments arm, FortressPay, making the acquisition a strategic fit for Ripple in the long term.
Although Fortress CEO Scott Purcell had expressed strong optimism about the deal in early July, labelling Ripple as the ideal partner, an internal divergence over business priorities within Ripple led to a postponement in finalising the acquisition.
Scott, however, downplayed the significance of the deal’s cancellation, asserting that it did not represent a substantial shift in their partnership:
“They are really just focused on pure B2B and institutional global business. We were a way for them to diversify into B2B2C. Many on their team were super excited about our tech and customer base but others pushed back to stay the current course.”
He emphasised that Ripple remained a valuable investor in Fortress, and their bond remained unwavering, with future collaborative initiatives on the horizon — albeit not in the form of a merger.
Importantly, Scott reassured that the withdrawal from the merger would have no adverse impact on Fortress customers.
He affirmed that this decision was unrelated to the prior security incident, and both companies retained a solid working relationship with shared future plans — minus the merger component.
He emphasised that:
“No customers are affected; this has nothing to do with our customers.”
As Ripple navigates its high-profile legal battle with the US Securities and Exchange Commission (SEC), the termination of this deal may offer potential opportunities to other enterprises connected to Fortress.