According to internal documents seen by CNBC, FTX achieved a billion dollars in revenue last year while expanding its global footprint through a number of acquisitions.
The private start-up's finances are audited. FTX quickly grew and was profitable.
The revenue of the privately held exchange went from $89 million to over $1 billion in just two years. Profitability is dependent on how you measure it. The operating income was up from a year ago. FTX had net income of $388 million last year, up from $17 million the previous year.
The leaked financial documents were not commented upon by FTX.
According to an investor deck shared with CNBC, the company brought in $270 million in revenue in the first quarter of the year, and was on track to bring in more than $1 billion in revenue. It is not clear how FTX held up in the second quarter as the price ofCryptocurrencies plummeted.
During the bull market, publicly traded Coinbase had $7.4 billion in revenue and $3.6 billion of net income. In the second quarter of this year, it had a net loss of $1.1 billion, compared with a net income of 1.59 billion in the same quarter last year, as retail trading volumes cratered.
Sam Bankman- Fried founded FTX three years ago. The 30-year-old CEO stepped in as the industry's lender of last resort, looking to backstop companies as Liquidity dried up Bankman-Fried's companies looked to acquire distressed assets on top of their loans. FTX signed a deal that gave it the option to buy BlockFi and was in talks to acquire Bithumb. FTX tried to buy Voyager in August, but was turned down because of a lowball bid.
At the end of last year, FTX had over $2 billion in cash and 27% profit margins according to the documents. If expenses are stripped out, the margins would be closer to 50%. It raised $400 million in January from SoftBank's Vision Fund 2 and Tiger Global, at a $32 billion valuation.
FTX was founded at a time when the world of trading was dominated by two companies. The largest exchange by trading volume got its start in China and is now trying to get into the U.S. market with an American subsidiary.
FTX has built its own subsidiaries to compete.
FTX Derivatives Markets is based in the Bahamas and is owned by Bankman- Fried. FTX Trading recently bought Digital Assets AG, out of Switzerland, as well as IFS Group and Hive out of Australia, bringing the total to 15 smaller companies around the world. According to the documents, its portfolio companies include Cyprus, Germany, Gibraltar, Singapore, Turkey and the United Arab Emirate. Getting the proper regulatory licenses to set up shop in a new country is one of the reasons why cryptocurrencies are so popular.
According to the documents, Bankman-Fried founded Alameda Research, which accounts for about 6 percent of FTX's exchange volumes.
The U.S. business is technically owned by the parent company. The company is trying to expand here with a number of high-profile ads.
According to the documents, FTX spent 15% of revenue on advertising and marketing in 2011. Tom Brady and Giselle Bndchen, who are also equity investors in the company, have endorsed the company. The American Airlines Arena was renamed the NBA arena by FTX. According to the documents, FTX was planning to spend an estimated $900 million on advertising in the next few years.
Stock trading is being added to the exchange. It launched equity trading weeks after Bankman-Fried took a 7.6% passive stake in Robinhood, fueling speculation that FTX is looking to buy the trading app in a land grab for U.S retail accounts. There is no deal in the works, according to Bankman- Fried.
FTX is ramping up its retail expansion. The documents show that it is mostly a place for more sophisticated traders to use derivatives. The majority of revenue came from futures trading fees. Exchanges make more money from futures and derivatives trades.
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