Superhero and Swyftx walk away from $1.5b merger because crypto has fallen from favour
The Superhero chief executive said the decision to end ties with Swyftx was motivated by declining demand for crypto exposure from Superhero’s target customer base of retail investors amid rising interest rates and a series of scandals, especially the collapse of crypto exchange FTX.
“Investor sentiment is turning back to quality,” he said. “Our view is to revert back to long-term traditional investments and giving people access to those investments and more transparency and control over their superannuation via our super product.”
He declined to comment on Swyftx’s six-month ownership of the company he founded other than to say he wished the company “all the best”.
But sources close to the Superhero camp said they had concerns about Swyftx’s corporate governance after the Financial Review revealed the Brisbane-based crypto broker’s larger-than-expected exposure to Binance, the world’s largest crypto exchange, which is being investigated by US federal prosecutors for alleged money laundering.
In a written statement, Swyftx chief executive Alex Harper attributed the demerger largely to regulatory hostility to the crypto sector.
“The policy environment has changed significantly since we announced the merger and neither party has been able to realise the vision of the merger in any meaningful way,” Mr Harper said.
“We currently face a scenario where there might be no realised benefits to customers from the merger until 2024 at the earliest. It is a disappointing outcome but ultimately, we took this decision in the best interests of both Superhero and Swyftx, as well as their customers.”
It is understood that a reported $55 million still owed to Superhero shareholders by Swyftx following the initial acquisition will no longer be outstanding, with sources framing the de-merger as a “clean break”.
Swyftx, which laid off about 35 per cent of its workforce earlier this month after the FTX collapse, told remaining staff of the deal’s abandonment in a private Slack thread on Tuesday evening.
Swyftx and Superhero unveiled merger plans in June, heralding the creation of a wealth management platform administering $1.5 billion in cryptocurrency, direct equities and superannuation assets on behalf of close to 1 million Australians.
It would have marked the first time consumers could access crypto assets and local shares and managed funds regulated by the Australian Securities and Investments Commission (ASIC) in the one destination.
But in a blistering statement in late August, ASIC took aim at stockbrokers adding “harmful” features to their platforms, including cryptocurrency trading.
“Crypto assets are high-risk, volatile and complex,” ASIC commissioner Danielle Press said at the time. “Brokers should think very carefully before offering crypto assets through their share trading apps.”
Superhero rivals Stake and SelfWealth had also announced their intention to add crypto-trading functionality, as had the Commonwealth Bank, which shocked the market with its plans to allow customers to trade crypto assets via its banking app. It is understood none of the brokers have as yet switched on crypto-trading functionality.
ASIC is in the midst of a year-end enforcement blitz against the crypto sector, separately suing fund manager Holon, comparison site Finder.com and crypto exchange Block Earner for alleged misconduct.
The Albanese government is expected to introduce legislation early next year to regulate crypto trading platforms and introduce custody rules.
Swyftx and Block Earner are among 14 members of industry group Blockchain Australia that signed an “affirmation” last month vowing to keep customer balances in 100 per cent full reserve and provide ongoing proof of reserves following the shock bankruptcy of FTX.
