Ripple made Fortress customers hit by security incident whole as part of acquisition

Quick Take

  • A Ripple spokesperson said talks about a potential acquisition of Fortress “accelerated” last week, after the startup’s customers lost funds in a security incident.

Crypto payments business Ripple covered losses suffered by customers of blockchain infrastructure startup Fortress Trust, as part of a deal to acquire it.

Fortress said in a statement issued on X, formerly known as Twitter, on September 7 that its customers had been affected by a “third-party vendor whose cloud tools were compromised,” but that there had been no loss of funds.

It was Ripple, in fact, that stepped in to make Fortress’s customers whole as part of an acquisition process that picked up pace following the incident.

“Conversations accelerated last week following the security incident via a third-party analytics vendor, but this opportunity makes sense for Ripple in the long term,” said a spokesperson for Ripple, who clarified that the company — already a minority investor in Fortress — had discussed a potential acquisition with Fortress previously.

“Luckily, Ripple was in a position to act quickly to step in and make customers whole, and there have been no breaches to Fortress technology or systems. Fortress notified customers immediately of the incident when it happened — as they mentioned in their tweets,” the spokesperson continued.

The amount of crypto lost as a result of the security incident is unclear. Ripple’s spokesperson said the company could not comment on specific wallets or customers. 

A deal comes together

After the incident, in its statement on September 7, Fortress said it had “immediately terminated the vendor integration” and paused all accounts to “assess and ensure system-wide security.”

Ripple announced the deal a day later, on September 8, with the company hailing “great long-term synergies between our businesses.” Ripple financed the acquisition with a mix of cash and equity. No valuation was disclosed.

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The deal, which remains subject to regulatory and due diligence approvals, would expand Ripple’s collection of regulatory licenses, as Fortress Trust — a subsidiary of Fortress Blockchain Technologies — holds a Nevada Trust License.

Ripple said on September 8 that it plans to continue to invest in Fortress and its FortressPay services, which will now make use of Ripple’s payments technology.

BitGo sees 'great outcome' for customers made whole

BitGo CEO Mike Belshe said the sale was a "great outcome" for those customers being made whole, although he said the situation with Fortress Trust had been "upsetting." He said that the financial services firm had not been involved, even though it was "indirectly affected."

"Although Fortress did use BitGo to custody some of its bitcoin & digital assets, BitGo was not affected," he wrote in a post on X. "None of the Fortress assets held at BitGo were at risk from this 3rd party integration or taken."

"This is the whole situation is exactly why we need decentralization," he continued. "We can’t continue to be dependent on the honesty of custodians, bankers, or 'trusted third parties' acting with integrity when bad things happen."

Ripple’s shopping spree

Ripple has been on a shopping spree this year. The company spent $250 million on the acquisition of Swiss custody startup Metaco in May and also acquired a stake in Bitstamp, the crypto exchange.

In July, it scored a partial win in its ongoing battle with the United States Securities and Exchange Commission, when a federal judge ruled that some of its sales of XRP did not fully meet the definition of a securities offering. 

(Updates with comment from BitGo CEO Mike Belshe.)


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About Author

Ryan Weeks is deals editor at the The Block, focused on fundraising, M&A and institutional trends in the crypto space, among other things. He is particularly interested in investigative work — so please send tips! Ryan previously worked at Financial News, Dow Jones as a fintech correspondent in London. Prior to that, he wrote for several different publications, including Sifted, AltFi and Wired. Beyond journalism, Ryan is a keen reader and writer. He enjoys all things active, especially running, rugby, climbing and tennis.

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