Deribit raises funds from existing investors at $400 million valuation: Sources

Deribit, the largest bitcoin options exchange by market share, has raised funds from existing investors at a $400 million valuation, four sources with knowledge of the matter told The Block.

The Panama-based exchange raised around $40 million in the deal, said two of the four sources. Its existing shareholders include QCP Capital, Akuna Capital and Dan Tapiero's 10T Holdings.

The fundraising comes three months after Deribit took a "small" hit from liquidating Three Arrows Capital's (3AC's) positions after the now-bankrupt crypto hedge fund failed to meet margin calls. Deribit raised new capital to restore its reserves to where they were before the 3AC incident, according to one of the sources.

3AC collapsed in June after suffering huge losses from the Terra ecosystem implosion and the ensuing crypto market turbulence. The fund's $200 million investment in Terra's native luna token sank to almost zero as the TerraUSD algorithmic stablecoin de-pegged from the dollar in mid-May. Deribit initiated a liquidation application against the fund in a British Virgin Islands court in June.

The unique circumstances of the latest fundraise — given the 3AC hit and the current weak market conditions — translated into a steep discount for existing backers, according to one of the sources. Deribit was valued at $2.1 billion in its last funding deal in August 2021, when it raised $100 million, the source said.

The $400 million valuation "is essentially irrelevant" because the fundraising is from existing investors, Luuk Strijers, Deribit's chief commercial officer, told The Block. "It could have been any value. It's more a clawback of dividends from existing shareholders. We paid a high divided before and decided it's more prudent to strengthen our balance sheet and retain assets instead of distributing them to shareholders."

Strijers said a company’s true valuation isn’t known until it conducts an external fundraise. He went on to say that Deribit kept its valuation low in this internal round “to avoid discussions” with potential investors and that a company’s valuation matters “only matters when you raise externally.”

Founded in 2016, Deribit caters mainly to institutional investors and co-founders John Jansen, Marius Jansen and Sebastian Smyczýnski keep a low profile compared to FTX's Sam Bankman-Fried and Binance's Changpeng Zhao. Despite this, Deribit has claimed an 88% share of open interest in bitcoin options trading, according to data from The Block's Research team.  Open interest is the value of outstanding derivative contracts that are yet to be settled.

Deribit's lower valuation highlights the pressure bearish crypto market conditions are putting on private company valuations. FTX is reportedly in discussions with potential investors to raise up to $1 billion at a valuation in line with the $32 billion achieved in January.