Circle Discloses FTX Exposure And More

A new regulatory filing from Circle indicated that the projections it had put forward about its performance back in February were no longer applicable and they would be significantly lower.

This was in light of the automatic conversions of its stablecoin USD Coin (USDC) on the crypto exchange Binance and the downfall of the FTX crypto exchange.

FTX exposure

The new regulatory filings revealed that the ‘tiny’ exposure that Jeremy Allaire, the CEO of Circle, had mentioned in the previous week on Twitter was around $10.6 million.

This was the investment that Circle had made in the FTX Group. Some could say that the amount of $10.6 million may not be a very material one for the company.

While the company tends to keep mum about the amount it invests in projects, there is no doubt that it has been quite active.

Along with its venture capital arm named Circle Ventures, the company has been part of the fundraising round for Aptos worth $150 million, for the pre-seed round of Ottr Finance worth $3.1 million and for Slide worth $12 million.

All of this has happened in the last couple of months.

No disclosure

A spokesperson for Circle said that the CEO was aware of the investment that they had made in FTX, but he did not disclose it last week on Twitter.

Allaire had only been addressing the ‘FUD’ surrounding the company’s relationship with the crumbling FTX Group. The CEO had asserted that their exposure to Alameda and FTX had not been material.

According to the spokesperson, it is not a policy of Circle to disclose its investments, and the top executive had done the same, as it was not material.

They further added that they had decided to disclose it in their recent filing because of the increased focus on FTX and because they are in registration.

However, Circle informed its investors that due to the bankruptcy of the FTX Group, they were no longer conducting any transactions with the company.

The filing

The new S-4 filing of the company revealed that it would write off its FTX investment and that it had suspended all transactions with them.

It further said that Circle would evaluate the impact on future services as well as financial impact associated with the bankruptcy.

Originally, the company had made the S-4 filing with the Securities and Exchange Commission (SEC) last year in August.

It had announced that it would go public at a valuation of $4.5 billion by joining hands with Concord Acquisition Corp.

However, the valuation of the USDC issuer had been doubled by February of this year to reach $9 billion. The deal had been expected to be finalized by the end of 2022.

But, Allaire said that it had been delayed until January 31st next year by Concord.

Other than the FTX fiasco, Circle may also miss its performance expectations because of Binance’s auto conversion of its stablecoin to Binance USD (BUSD), which is the exchange’s own stablecoin.