Source: Forbes, Aug 2018
To the crowd assembled, FBG’s fame stems from turning $20 million into $200 million in a year.
FBG’s approach has three pillars: Invest like a venture capitalist in initial coin offerings (ICOs), trade on news and events by moving in and out of tokens rapidly and, critically, exploit insider relationships and marketing hype to ensure profitability. The firm’s rise speaks volumes about the anything-goes world of cryptocurrencies, where the stated ideals of democratization are a joke and being an insider is the surest path to riches.
Like other big investors in crypto, FBG is offered “presale” discounts on ICOs to the tune of 30%.
According to Zhou, trading makes up more than half FBG’s revenue, but as the crypto trading environment has become more transparent and efficient, the firm has moved from arbitraging crypto exchange- price discrepancies to event-driven trading, in which FBG bets on how topics like regulatory news will affect crypto prices. For example, when the CME Group announced it would launch bitcoin futures contracts last December, Zhou went long on the bitcoin uptick. When news broke that the Japanese exchange Coincheck had been hacked earlier this year, he quickly went short. In 2017, FBG says it quadrupled its money in trading.
Not all of FBG tactics seem completely aboveboard. One little-publicized investing dynamic that FBG’s executives gloss over is its relationships with cryptocurrency exchanges, the crypto equivalent of the NYSE or Nasdaq. Typically, when a new token announces its listing on a top exchange, the price jumps because the new liquidity is perceived as an endorsement. Zhou has cozy relationships with the three most active crypto exchanges: OKEx, Binance and Huobi, each processing $500 million to $1 billion or more in crypto trades a day. Using these connections, FBG has helped ICOs it has invested in, like Zilliqa, obtain listings on the exchanges.