Superhero founders to buy company back from Swyftx as crypto volatility, regulatory changes sink $1.5 billion merger

Share trading platform Superhero’s planned $1.5 billion merger with Australian cryptocurrency exchange Swyftx has been scrapped, as violent market volatility and the looming threat of regulation scupper advanced plans to create a financial ‘super app’.

As first reported by The Australian Financial Review on Tuesday, the June decision to merge the companies into an 800,000-customer unicorn is no more, with Superhero’s co-founders, and a coterie of early investors, set to buy the company back.

“After discussions with Swyftx’s leadership and its board, we came to the decision that demerging is in the best interests of Superhero, our team and our customers,” said co-founder John Winters in a written statement.

“Superhero will return to being independently owned by myself and my co-founder Wayne Baskin as well as our loyal investors who have supported the growth of Superhero since 2018,” he added.

Winters thanked Swyftx co-founders Alex Harper and Angus Goldman for their support, which promised to create the first Australian app capable of handling traditional share trading and cryptocurrency investments in one platform.

The decision comes at the tail-end of a bruising year for cryptocurrency investors and the platforms facilitating their trades.

Swyftx this month announced layoffs for approximately 40% of its workforce, as it braced for the potential of further market ructions in the vein of FTX’s spectacular collapse.

“The volatility in the market as well as the current regulatory environment has made it increasingly difficult to achieve the initial vision that inspired the merger earlier this year,” Winter wrote.

Recent regulatory interventions include the Australian Securities and Investments Commission’s lawsuit against Finder, alleging its crypto-based Finder Earn investment product sidestepped financial licencing guidelines. Other players, like Block Earner, are also facing legal action from the corporate watchdog over similar concerns.

More broadly, Labor has recently confirmed a consultation paper on the federal government’s ‘token mapping’ report will arrive in early 2023, asking stakeholders for their views on which assets should be regulated under financial services law, and how to best operate custodial and licensing arrangements.

Winters did not directly respond to questions SmartCompany posed about those legal and regulatory movements.

However, the Swyftx demerger signals the end, for now, of Superhero’s plans to incorporate crypto trading.

“Given the current market volatility as well as regulatory pressure and subdued customer demand, for the time-being Superhero has no plans to add crypto trading to the platform,” he said.

“We have always taken a conservative approach when it comes to compliance and regulation and will continue to engage with our key regulatory stakeholders when adding additional product offerings.”

The decision to pull out of the merger will not impact staff numbers at Superhero, he added.

“There are no plans for any Superhero staff to leave the business and we are still recruiting for a number of key roles,” Winter said, while thanking team members for their efforts during a “turbulent time” for the business.