With Mad Lads on Top, Solana Exchange Backpack Sets Its Sights on Coinbase

Building a crypto exchange following the collapse of FTX and the regulatory penalties of Binance undoubtedly draws additional scrutiny for Backpack. But it also provides a roadmap of what not to do—and Backpack co-founder Armani Ferrante tells Decrypt that he welcomes the opportunity to avoid the usual industry pitfalls.

“We really want to be one of these bastions of integrity and build one of these next-generation exchanges that sets a gold standard for security, for safety, and for trust,” he said.

To aid in that goal, Backpack announced Wednesday that it raised $17 million in a Series A funding round led by Placeholder VC, which values the startup at $120 million. Other backers include Jump Crypto, Delphi Digital, Wintermute, Hashed, Robot Ventures, Selini Capital, Amber Group, and various angel investors.

Ferrante—who previously worked for FTX’s sister company Alameda Research before departing to start his own company—knows well the pain of dealing with a crypto exchange that isn’t all it seems.

Backpack (aka Coral) raised $20 million in seed funding led by FTX Ventures in late 2022, just before that exchange’s house of cards fell apart. Quickly, the startup found that most of its funding was locked on FTX’s inaccessible platform, leaving it scrambling.

But Backpack persisted, launching the Mad Lads project last spring that helped reenergize the fading Solana NFT market, as well as its Backpack wallet that enables executable NFTs or “xNFTs,” which let creators pair content and experiences to the blockchain tokens. Nearly a year later, Mad Lads is the most valuable NFT project on Solana.

“Mad Lads have kind of surpassed any hope and dream that I think we ever could have had. It's honestly just such a testament to the power of an online group of people to just do incredible stuff,” Ferrante told Decrypt. “It’s also just been incredible to see Solana NFTs come back from the depths of the bear market, from nothing.”

Backpack’s own ambitions have grown substantially over the last year. In October, the startup announced that it had secured a Virtual Asset Service Provider license for Exchange Services from the Dubai Virtual Assets Regulatory Authority (VARA) and that it would launch a regulated exchange with the goal of expanding broadly around the world.

The exchange recently announced that it is now live across part of the United States, in 11 states total, and Ferrante—who was calling from an office in Tokyo—said that Backpack is seeking licensing in Japan, too. Backpack currently supports Solana trading, but Ferrante said that Ethereum and Bitcoin support are coming too.

Backpack’s goal, of course, isn’t to run into the kinds of issues that took down FTX and put a dent in the reputation (and checkbook) of Binance. In fact, Ferrante said that the template is closer to something like Coinbase, but with a fresher outlook.

“It's definitely really challenging. I think we have the benefit of hindsight,” he said. “We are certainly standing on the shoulders of giants. I think of companies like Coinbase, for example, who have been like the bastion of compliance and integrity in this space and serve as really great examples that you can do this and you can do it right.”

Ferrante added that he believes Backpack can come at that task “with a fresh set of eyes and as a small team that’s nimble,” potentially giving it more ability to iterate and innovate in ways that “a larger institution might have trouble with.”

What does that mean in practice? He pointed to what he says is Backpack’s approach to engineering “novel and interesting” approaches to exchange architecture, trading execution, custody of customer assets, and auditability and compliance efforts.

Backpack’s fundraising announcement and expanding plans come right as the crypto world is seeing explosive gains. Bitcoin and other top coins have set multi-year highs, and the approval of spot Bitcoin ETFs in the United States has apparently fueled broader crypto demand.

Ferrante sees the latest upward cycle as a sign that much of the “Wild West” industry missteps and manipulation are increasingly in the past. The industry was “forced to mature” after FTX, he says—and now he believes that the Backpack exchange is well poised to take advantage of the opportunity ahead. And there’s more growth to come, in his view.

“The industry is not going anywhere,” he said, noting Bitcoin ETF demand and traditional financial institutions embracing crypto.

“At the same time, I think what you would normally describe as ‘retail’ is still kind of sitting on the sidelines,” Ferrante continued. “That presents a really great opportunity that's energizing for a product builder because I think we can build with a lot of positivity in mind but without as much of the noise. It’s like the best of both worlds.”

Edited by Ryan Ozawa.