A Statement from Paxos on Recent Market Events and Volatility

Earlier today, Paxos sent the following update to its customers.

The crypto industry is currently facing a tumultuous period. Amidst the ambiguity and turmoil, we want to provide transparency and reaffirm that your assets and your customers’ assets are safe. Paxos remains well capitalized and exceeds regulatory capital requirements.  We are generating positive cash flow, and November will represent a monthly record for revenue and profits. 

Paxos since its founding has embraced transparency, oversight and regulation. In May 2015, we became the first chartered trust in the United States to operate in crypto assets. Partnering with Paxos means you have chosen a regulated issuer and service provider. Our oversight and legal protections provide safety and stability in our practices. By working with a regulated custodian, you can run your business with confidence. We do not and will never commingle customer funds with Paxos corporate funds. This is both the right practice and legally required by our regulators.

Paxos Customer Assets Are Protected By Paxos’ Regulatory Status: 

  • Our customers are always protected because Paxos is legally required to fully segregate customer assets in bankruptcy remote accounts. In the unlikely event that a Paxos regulated entity becomes insolvent, New York and Singapore law clearly dictate how customers’ assets will be promptly returned to them. This is a critical distinction of Paxos.
  • Paxos Trust Company, LLC (“Paxos Trust”) is a limited purpose trust chartered and regulated by the New York State Department of Financial Services. It services almost all of Paxos’ US customers. 
  • Paxos Global Pte. Ltd. (“Paxos Global”) is regulated and supervised by the Monetary Authority of Singapore as a Major Payments Institution. It services most of Paxos’ non-US customers. 
  • All customer assets are always held fully segregated from corporate assets and bankruptcy remote. They are your funds. We hold them for you; they are liquid and available to you upon request. This legal protection is a foundational aspect of our offering, different from almost all others in the marketplace operating through money transmission licenses or no oversight at all.  Our regulators ensure this through prudential regulations and regular exams. 
  • We have oversight, risk management and corporate controls built into all aspects of our operations and independent third parties which audit and attest to them regularly. We also have an independent board of directors

Paxos Has No Exposure to FTX and Limited Exposure to Alameda:

  • Paxos does not have any exposure to FTX, either in the US or abroad. Paxos has no business dealings with FTX and we do not own or custody the FTT token. 
  • Alameda was one of many market makers on the Paxos exchange. Just like all market makers and customers, we required Alameda to pre-fund all activity so there is no risk to Paxos or our customers. 
  • Paxos affiliates occasionally extend loans to select firms as part of our designated market maker program which included Alameda. These loans are always over-collateralized and must be held on-platform in Paxos’ full control and custody. As with all similar loans, Paxos required Alameda to provide collateral substantially in excess of the original loan and only use the loan for that program. These loans are never funded with customer monies. 

This Does Not Impact Paxos Profitability or Operations: 

  • Paxos’ business is in its strongest position ever. We are cash flow positive and we’re adding to our capital base everyday. We have a strong balance sheet with many years of runway to navigate any market turmoil. 
  • We’ve designed our company and operations to be “institutional grade” so that we protect customers and their assets. We avoid the risky business practices of lending off-platform, borrowing against customer funds or speculating. 

What We Expect to Happen in the Coming Weeks: 

  • We’re engaged in ongoing dialogue with our regulators and law enforcement as market activity continues and more details regarding FTX and Alameda activity come to light.
  • Our teams are available to you. You can reach out to your usual contact. Please view us as a source of truth and transparency. We will provide you with as much clarifying information as possible. We will update you by email or through our blog as more develops.

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