Author: Nancy, PANews

A nearly $200 million Solana token "missing case" has drawn attention to FalconX, a cryptocurrency brokerage and the world's first registered cryptocurrency swap dealer with the CFTC.

Nearly $200 Million SOL "Returned to Its Owner," Concerns Over Crypto Reconciliation Risks

In 2021, approximately 1.35 million SOL tokens were transferred into FalconX's wallet without any identifying information. Over the past three years, these tokens plummeted to about $13 million following the FTX collapse, but due to Solana's strong recovery, their value has now exceeded $190 million. Binance is the "owner" of this substantial amount of funds.

According to Coindesk, the FalconX wallet received 1.35 million SOL three years ago, but the transaction records did not specify the remitter's information, nor did any claimant appear immediately; at that time, the price of SOL was around $20 to $30.

FalconX confirmed in an interview that there were "reconciliation anomalies" with the SOL tokens it holds. The company has checked accounts with exchanges, clients, and partners, but no one has shown relevant transaction records.

Recently, Binance, a key liquidity partner of FalconX, stepped forward to demand the return of these funds. FalconX has now returned 1.35 million SOL to Binance but has not provided further explanations for the inability to track these funds over the years, only stating that its clients would never face the risk of losing funds due to this situation, and if these assets are not found, Binance would bear the loss itself.

While reconciliation issues can also occur in traditional finance, the lack of regulation has raised community concerns about accounting systems and controls in the crypto space.

Over $400 Million Raised in 5 Rounds of Financing Over 2 Years, Seeking Acquisition Opportunities

As the main player in this crypto reconciliation incident, Binance's primary crypto brokerage FalconX has actually been established for over seven years and focuses on blockchain, cryptocurrency, and fintech as a cryptocurrency brokerage and digital asset trading platform.

The company was founded by Raghu Yarlagadda and Prabhahar Reddy, with Raghu Yarlagadda previously serving as Google's Chief Product Manager, responsible for supporting the Chrome browser and leading Chromebook revenue growth to over $3 billion. He has been recognized as one of the top 25 CEOs in the crypto space and has won the prestigious Goldman Sachs Builders and Innovators Award twice; Prabhakar Reddy holds an MBA from Harvard Business School and has worked at the well-known Silicon Valley venture capital firm Accel Partners.

FalconX's business is highly diversified, offering major liquidity, derivatives, financing, direct market access, ETF solutions, forex trading, and Prime Connect among various market tools. This year, FalconX has launched several products targeting market demand, such as tokenized treasury fund trading to meet investors' growing interest in U.S. government-issued securities, acting as a shadow bank to provide short-term loans to hedge funds and other cryptocurrency investors while charging annual interest rates of up to 25%. To date, according to FalconX's official website, the company has over 600 institutional clients and has processed over $15 trillion in transaction volume, allowing clients to access 94% of global spot and derivatives liquidity in one stop.

With multiple business lines, FalconX's revenue is substantial. According to Raghu Yarlagadda's recent interview with Bloomberg, FalconX's second-quarter revenue hit a record high, growing 2.5 times compared to the same period last year, particularly with derivatives trading revenue increasing nearly threefold, although he declined to disclose specific figures. Additionally, Raghu Yarlagadda revealed that the company is actively exploring potential acquisition opportunities, primarily focusing on high-quality small companies specializing in institutional infrastructure, data and analytics, tokenization, and expanding its trading team by 2025, while assessing relevant industries and key players within them.

During its establishment, FalconX secured five rounds of financing in about two years, raising at least $420 million, with a valuation reaching $8 billion. Its investors include the Singapore sovereign wealth fund, Tiger Global, Thoma Bravo, Altimeter, Coinbase Ventures, and B Capital, among others. FalconX has also invested in several crypto projects, including Safe, Bitlayer, Syndicate, Elixir, and Kemet Trading.

However, FalconX has also faced challenges related to compliance and the fallout from the FTX platform collapse during its development.

In May of this year, the U.S. Commodity Futures Trading Commission (CFTC) filed charges against FalconX, accusing it of improperly facilitating client trading on digital asset exchanges by directly trading futures and swaps through sub-accounts on exchanges like Binance. This was the CFTC's first action against an unregistered futures commission merchant. As part of a settlement, FalconX voluntarily changed its client information collection methods and updated its KYC policies, in addition to paying over $1.7 million in fines.

For instance, due to its collaboration with liquidity providers like FTX, FalconX previously disclosed that it had exposure to funding risks related to FTX, with 18% of the company's discretionary funds trapped in FTX. However, the company still has ample capital, with decades of operational budgets and a debt-to-equity ratio as low as 4%. Perhaps as a warning of asset risks stemming from FTX's bankruptcy, FalconX also launched the Prime Connect solution this year, allowing institutional investors to trade on the platform while their assets are held in regulated custody services, thereby reducing counterparty risk.

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