Arkham Intelligence set to launch a derivatives exchange

Arkham Intelligence, a blockchain data company backed by OpenAI’s Sam Altman, has hinted at launching a derivatives exchange in November.

The firm will also close down its London and New York bases and relocate its headquarters to Punta Cana in the Dominican Republic to leverage the country’s free-trade zone.  

According to sources who opted to remain anonymous, the upcoming derivatives exchange will specifically cater to retail investors. It will offer a user-friendly platform and competitive features to rival established industry giants in the derivatives market.

However, Arkham’s derivatives exchange will not be available to investors in the U.S. market due to regulatory restrictions. The launch of Arkham’s derivatives trading capitalizes on the growing crypto market and the gap, allowing new players to emerge following the collapse of FTX.

Arkham to compete with established derivative exchanges

Arkham Intelligence, a crypto firm backed by OpenAI's founder Sam Altman, is planning to launch a derivatives exchange https://t.co/o5T4GzcE1B

— Bloomberg (@business) October 11, 2024

An anonymous source who spoke to Bloomberg revealed that Arkham was joining the derivatives exchange market next month. Arkham’s exchange will directly compete against industry leaders like Binance, OKX, and Bybit. Sources believed that Arkham’s entry would disrupt the landscape, citing its user base foundation of 880K monthly active users. 

The data intelligence firm was in discussions with Middle Eastern investors as it actively sought to raise at least $100 million to support its expansion into derivatives. Its relocation to the Dominican Republic is likely driven by factors such as lower operating costs and a favorable regulatory environment.

A CCData report also revealed that centralized exchanges (CEXs) recorded over $3 trillion in derivatives trading activity in September alone, accounting for nearly 71% of the total crypto volume. The combined spot and derivatives trading volumes on CEXs stood at over $4 trillion in September, the lowest monthly activity level since June.

According to CCData, the 17% decline in the joint spot and derivatives trading volumes aligned with the end of the seasonality period – a time of reduced trading activity. CoinMarketCap’s data showed that Binance boasted a spot and derivatives volume of $12.7 billion and 47.6 billion, respectively.

The ARKM token, with a market cap of about $344 million, surged 15.5% to $1.55 following the announcement.

The company signed a two-season deal in July to sponsor the Turkish football team Galatasaray in a push to promote its brand. It will spend approximately $2 million (~1.8M Euro) per season to get its logo on the team’s shirt sleeves.

Arkham’s regulatory concerns on centralized exchanges in the U.S. market 

The regulatory landscape surrounding U.S. CEXs was reportedly unfavorable to the crypto industry. Crypto exchanges have been constantly tussling with regulators such as the U.S. SEC and the CFTC. The AI-driven blockchain analytics platform will operate under a Dominican Republic free-trade zone license offering tax and other financial benefits.

On Oct. 10, the U.S. SEC charged Rimar Capital Entities, owner Itai Liptz, and board member Ckiffird Boro. The trio was accused of defrauding investors by ‘making false and misleading statements about the use of artificial intelligence.’

“As AI becomes more popular in the investing space, we will continue to be vigilant and pursue those who lie about their firms’ technological capabilities and engage in ‘AI washing’.”

• Andrew Dean, Co-Chief of the SEC’s Asset Management Unit

Rimar, Liptz, and Boro agreed to cease and desist without admitting or denying the U.S. SEC findings. Liptz paid disgorgement and prejudgment interest of $213.6K and a civil penalty of $250K. Rimar LLC consented to a censure, and Boro paid a civil penalty of $60K.