Swan deployed more than $200 million in 2023 building out institutional offerings such as Bitcoin-backed lending
This year was a bloodbath for the crypto industry—and for several of its biggest names, including Sam Bankman-Fried and Changpeng Zhao—but it’s become a victory lap for supporters of Bitcoin, which not only survived the calamity but ended the year with a spectacular rally.
Swan, a leader among financial firms in the Bitcoin space, today announced an expansion of services that includes a foray into institutional products like Bitcoin-backed lending, along with $40 million in funding raised in 2023 for expansion efforts and another $205 million deployed across venture and private equity investments, a new hedge fund, and a credit fund.
Cory Klippsten founded Swan in 2019 as an investment platform focused solely on Bitcoin, offering basic asset management services to investors including buying and selling crypto as well as crypto custody.
Klippsten has also been a frequent critic of the rest of the crypto industry, pointing to the failures of firms such as FTX as an example of why the sector should focus on Bitcoin and move away from risky practices like rehypothecation, or using other investors’ collateral for investments, which ultimately sunk other bank-like platforms such as BlockFi, Celsius, and Genesis. He is also a visible figure in the Bitcoin community, with Swan opening a Bitcoin-dedicated house in El Salvador in the fall. El Salvador adopted Bitcoin as legal tender in 2021.
In an interview with Fortune, Klippsten said Swan’s resilience in the wake of so many industry failures drove the firm toward offering institutional services. “We had a thesis that with the destruction of capital and all the fraud and all the other crypto shenanigans … that a lot of companies and family offices around the world still needed those types of services, and there weren’t enough providers,” he said. “People trust us, and people like our brands.”
Swan 2.0
Swan has not been free of controversy. The firm relied on Prime Trust for custody services, with the Nevada-based company filing for bankruptcy in August alongside allegations of mismanaging assets. Swan then turned to Fortress, which was founded by the former CEO of Prime Trust, before Fortress faced a hacking incident in early September, along with a failed acquisition by the XRP-issuer Ripple—the very type of blockchain firm Klippsten often criticizes.
Swan is now working with another custodial firm, BitGo, to launch a joint venture trust company, which would be the first Bitcoin-only trust in the U.S. Klippsten declined to say where they are applying for a charter but that he hopes to launch it by the third quarter of 2024. Until then, Swan relies on a combination of Fortress, Bakkt, and BitGo. “I could’ve wished for better outcomes with those guys,” he said of Fortress, although he noted that he still believes in the model of separating brokerage from custody.
Swan’s entrance into the crypto lending space is sure to evoke bad memories of failed platforms like Celsius and Genesis. Klippsten said Swan’s differentiation is twofold: It will not rehypothecate customer assets, and it will only offer Bitcoin-backed loans. He pointed to a similar product from Silvergate, a crypto bank that collapsed in March but never lost customer funds for its asset-backed loans.
With the lending product, Swan users can deposit Bitcoin as collateral and receive around 50% back in dollar-denominated loans at an interest rate in the “low double digits.” On the other side, Swan will find creditors to loan capital, taking an origination fee and spread at their borrowing and lending rates. Klippsten said the lending product will launch in the next couple of weeks with $20 million ready to deploy.
Swan has raised around $165 million in equity funding in 2023, with $125 million for private equity and venture investments. An additional $50 million was raised for Swan’s first hedge fund, as well as $30 million for credit funding that will go to its lending services. While Klippsten declined to share details on the spending, he said Swan’s investments are focused on the Bitcoin ecosystem. Klippsten said Swan plans to raise another $150 million in 2024 to fund expansion.
Swan’s revenue streams are also quickly expanding, buoyed by other institutional offerings such as advisor services and asset management for investors. According to Klippsten, Swan had annualized revenue of $125 million in November and expects to cross the $200 million mark in the first quarter of next year.
