Deribit, Europe’s largest crypto options exchange, has revealed details of sophisticated prime brokers that facilitate trades against customers on its platform, its affinity for tax-haven jurisdictions like Dubai and Panama, odd disclosures about where it holds assets, and its historical relationship with the pro-Tether leader of Cantor Fitzgerald, Howard Lutnick.
Yesterday, Bloomberg reported that Deribit has received preliminary acquisition interest from entities like Kraken and has hired Financial Technology Partners LLC to assess bids. That headline renewed interest in Deribit’s finances generally.
Researchers soon unveiled a labyrinth of entities that profit from Deribit customers. After alleging ties to liquidation proceedings related to Three Arrows Capital, Su Zhu and Kyle Davies’ failed hedge fund, some are skeptical that Deribit is worth anything close to the $4-5 billion range that Bloomberg mentioned.
For context, Deribit facilitated $743 billion in notional options trading volume in 2024 — double its 2023 volume — plus at least $400 billion in non-options futures and spot transactions.
Although the company generates revenue from this activity in many ways, it directly charges its options customers a 0.03% commission (specifically, 0.0003 BTC or 0.0003 ETH per options contract, capped at 12.5% of the options price).
A who’s who of third-party brokers
Attracted to such voluminous derivatives activity, prime brokers and quantitative trading firms have flocked to the platform. Disproportionately equipped to analyze, capitalize, and profit from complex financial products like bitcoin (BTC) options, companies like ex-Bitmain Jihan Wu’s Matrixport, ex-SAC Capital Marc Asch’s Hidden Road Partners, ex-Cantor Fitzgerald Howard Lutnick’s BGC Group, Raghu Yarlagadda’s FalconX, and Alexander Blume’s Two Prime rank among Deribit’s most active third-party brokers.
The staunchly pro-Tether, pro-Donald Trump, and incoming US Commerce Secretary Lutnick is an interesting name atop Deribit’s list of “inter-dealer brokerages.”
Lutnick’s BGC Group facilitates liquidity at Deribit and might constitute a US government ethics rules violation as early as next week if he were to continue to serve as its CEO while serving in Trump’s administration.
As a precaution, Lutnick has agreed to step down and divest his interest in BGC Group — as well as in Cantor Fitzgerald, which holds tens of billions of dollars in Tether’s USDT reserves — upon his US Senate confirmation.
Read more: Tether became a political powerhouse in 2024
Deribit’s sprawling, offshore operations
Like many crypto companies, Deribit takes advantage of a global field of privacy- and tax-friendly jurisdictions. It has operations in Dubai and Panama and holds assets at Coinbase, Fireblocks, Copper Clearloop, Cobo Loop, DRB Panama Inc, Deribit FZE, FalconX, Zodia, Fidelity, and “various third-party custodians.”
In public disclosures, Deribit estimates the quantities of its customer assets that it holds at these various locations with markings like plus (+) or tilde (~) signs to indicate approximations.
Although the exchange has not experienced any catastrophic hacks to date, its labyrinth of custodians doesn’t have a perfect track record of safeguarding customer assets.
For example, a November 2022 hot wallet hacker stole $28 million from customers. To its credit, Deribit immediately compensated victims using corporate reserves.
