Crypto Prime Broker SFOX Protecting All Assets From Bankruptcy

Cryptocurrency-focused prime brokerage sFOX is taking efforts to secure digital assets belonging to its clients as regulatory tensions build. 

SFOX told Blockworks exclusively that it will insure clients’ assets up to $250,000 — without imposing fees — via its custody arm, sFOX Safe. 

Industry prime brokerages typically offer custodial solutions for free or at discounted rates in an effort to maintain relationships with trading clients. And industry participants say there’s opportunities to capitalize on business development opportunities in the sector, especially given regulatory setbacks in the US for larger counterparts. 

The firm’s offering is set to be made available to individuals who “choose to secure their entire portfolio in sFOX SAFE, use sFOX SAFE to safeguard client assets in their own digital asset business, or simply place $250,000 of digital assets in an account for protected custodial diversification,” the company said in a statement. 

The company’s pitch falls in line with longstanding FDIC safeguards in the US that protect up to $250,000 of client assets held by registered entities, like banks. 

Akbar Thobhani, the CEO and co-founder of sFOX, told Blockworks that there’s a crypto-native twist on his company’s offering compared to what the FDIC has historically provided.  

“When you give money to a bank, the bank can lend that money out,” Thobhani said. “We’re not taking that money and lending it out. You get to decide when you want to lend it out, or what you want to do with it. We’re just holding that in bailment.”

SFOX is not a bank. It is rather a culmination of crypto things: including a custody solution, coupled with a brokerage solution that allows clients to trade digital assets. Those clients include the likes of hedge funds, asset managers, high net worth individuals and family offices. 

Thobhani told Blockworks that its custody and trading services are kept separate from one another.

Thobhani equated sFOX Safe’s business model to that of a valet. A valet drives off with your car and parks it somewhere safe, but they don’t own your car. In the analogy, the assets of sFOX’s customers are the car, and sFOX is the valet. 

There’s also a separate insurance policy for the custody service underwritten by Lloyd’s of London. This insures customers’ assets up to $200 million to cover “the physical loss of private keys from various covered events,” sFOX told Blockworks.

SFOX Safe is offered through an sFOX affiliate, the SAFE Trust Company. That company is chartered by the Wyoming Division of Banking, an agency from a state known to be friendly to crypto companies and investors. 

The current SEC hasn’t been quite as kind. With Chair Gary Gensler himself stepping into the hot seat Monday, Thobhani told Blockworks that he too wanted to see more regulatory clarity.

“The more clarity we have, the better products we can build and the more kinds of services we can offer to our customers within the confines of the regulation in the US,” Thobhani said.

Blockworks previously reported in August 2022 that the IRS targeted sFOX with a John Doe summons — a tactic used to identify individuals who are potentially evading taxes. At the time, sFOX was forced to volunteer information about all customers who were US taxpayers and traded at least $20,000 in digital assets between 2016 and 2021.

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