Crypto trading firm Auros secures $17M investment as it recovers from FTX woes
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Crypto trading and market-making firm Auros Global, a victim of crypto exchange FTX’s bankruptcy, has overcome its liquidity struggles, Chief Investment Officer Benjamin Roth told CoinDesk in an interview.
Auros was released from a court-supervised provisional liquidation last week following a major debt restructuring and secured a new $17 million investment led by traditional high-frequency trading firm Vivienne Court Trading and public bitcoin miner Bit Digital (BTBT).
The events come after months of behind-the-scenes maneuvering to keep the firm afloat following the implosion of crypto exchange FTX that wiped out several crypto firms and caused painful losses for some trading firms.
Before the FTX crash, Auros was among the top 10-15 producers of digital assets, handling about 1-2% of total crypto trading volume, according to the company. The firm faced liquidity problems in November when around $20 million of its digital assets were stuck on now-defunct FTX and had missed payments of around $18 million in decentralized finance (DeFi) loans.
After filing for provisional liquidation in the British Virgin Islands, the firm spent about five months under judicial supervision negotiating how to repay its outstanding debts and make creditors whole. Roth said the company is putting the FTX shock behind it.
“We’re the same company we were before FTX,” he said.
Read more: These crypto market makers were wary of FTX before the collapse
Navigating FTX fallout
After FTX imploded, and as fears rose among market participants of a full-blown crypto insolvency crisis, lenders raced to recall outstanding loans to mitigate potential losses. With a significant portion of funds locked up on FTX, Auros faced a sudden liquidity crisis to pay back all its desperate creditors.
“We were in a position where we didn’t have enough cash to cover all of these open loans,” Roth said.
Auros management decided not to repay any of the lenders at that time and voluntarily applied for provisional liquidation to the British Virgin Islands (BVI) court as an intermediary between the lenders and Auros.
“We didn’t pay immediately because our intention was to pay everything back,” according to Roth. “We’ve been profitable, so it was really just a matter of buying time to make sure all creditors were treated fairly and equally.”
BVI assisted in restructuring all outstanding Auros debt, by converting outstanding open current loans – lines of credit without a repayment deadline – into designated loans with maturity. As for the roughly $18 million in DeFi loans, the firm has already repaid 55% of the debt on blockchain-based credit platform Maple, spreading the rest into nine- and three-month loans, CoinDesk reported last month. Roth declined to disclose details of the restructured debt to centralized lenders, citing contractual obligations.
Auros received the sealed court order from the BVI judge ending the preliminary liquidation process last Wednesday, according to the firm’s spokesperson.
Auros ran a lean business, aware that crypto markets have been cyclical, but Roth said he was “laser focused” on finding further cost savings in recent months.
The firm’s key cost-cutting measures were to dramatically reduce Amazon Web Service costs and rethink data center management — trading firms need extensive cloud computing capacity to run trading algorithms — to limit operating costs. It also eliminated layoffs and laid off some workers. The company currently employs around 55 people globally.
Strategic investment
Roth said that before FTX’s collapse, Auros was already prepared to raise capital, and that the judicial review complicated the fundraising efforts. “It accelerated the demand to raise but slowed down the process because every decision had to go through the provisional liquidators,” he said.
The investment from Vivienne Court means the Australia-based traditional trading firm will have exposure to digital asset trading.
“They weren’t into crypto, and they were thinking about getting into crypto,” Roth said of the investment.
Marcel Klooss, co-founder of Vivienne Court, said in a statement that “our two firms have complementary skills and unique characteristics that will generate sustained synergies.”
The second largest investor, Nasdaq-listed BitDigital, will double as a client and strategic partner for the new derivatives solutions business Auros is expanding to provide returns and protection offerings to clients. For BitDigital and other miners who manage a large treasury of cash and digital assets such as bitcoin (BTC) and ether (ETH), Auros will help them hedge against futures production and earn high returns on their holdings by creating option structures.
“The team’s deep derived background and expertise across technology and finance also provide the necessary capabilities to address our growing business needs,” Samir Tabar, chief strategy officer at Bit Digital, said in a statement.
Other investors in the round include asset manager and blockchain technology developer Trovio, venture capital investment firm Primal Capital, trading firm Epoch Capital and a group of senior and former traders of proprietary trading and market-making firm Optiver.
Marcel Klooss and Bit Digital’s co-founder Hughes Ching will join Auros’ board.
Auros’ capital raising comes as investments in crypto companies have largely disappeared after a year-long bear market.
The investment round was important as Roth expects consolidation in the crypto industry this year.
“A lot of small players just want to disappear,” Roth said. “It’s not easy out there to make money at the moment, even if you’re big and sophisticated.”
UPDATE (March 21, 1:00 UTC): Added details and comment about the investment.
