E165: Backpack CEO: How I Survived Crypto's Biggest Collapse, Then Built a $420B Exchange

Harmony Feronte joined Alameda Research in January 2018 after university and about a year as a software engineer at Apple, but left after roughly three months because trading was not the work he wanted to do. He returned in 2020 to build on Solana, contributing to its first decentralized exchange, one of its first wallets, its first multisig custody tool, and a smart-contract developer framework. Backpack began in late 2021 or early 2022 as a Solana-focused project built around self-custodial wallets and XNFTs. After FTX collapsed, the team concluded that the industry needed a global exchange; Backpack is now described as a regulated global crypto exchange with more than $420 billion in trading volume.

Backpack had $14.5 million on FTX when it collapsed, representing about 88–90% of the company’s balance sheet. Feronte said the company was effectively dead if what they were learning about FTX proved true. During a flight from Lisbon to Miami, he decided to focus on surviving rather than give up. He said the collapse hurt employees, customers, Solana, and others who had done nothing wrong. In his view, Solana had no operational connection to FTX, although FTX held substantial SOL and had an incentive to support the network; misinformation helped create the impression that Solana was an “FTX chain.”

Feronte described Solana as an engineering feat with the potential to support new market structures, while naming execution risk as a major concern. He said the network remained active through repeated predictions of its demise, including after FTX’s collapse, outages, meme-coin mania, and the decline of NFTs; he sees that resilience as a defining strength of decentralized networks. He also warned that transparent public blockchains can enable pervasive financial surveillance. Privacy-preserving technologies such as Zcash offer a counterbalance, he said, but no single technology delivers every desired property.

Feronte sees finance as crypto’s strongest source of real-world value, with other areas still nascent. He expects the industry to move from experimentation toward strengthening technology for practical financial uses, including decentralized exchanges, stablecoins, borderless payments, and disintermediated stock ownership. He contrasted traditional stock trades, which pass through brokers, an exchange, DTCC, and transfer agents, with blockchain’s potential for T+0 rather than T+1 or T+2 settlement. He described transfer agents as the underlying source of truth for ownership, while acknowledging that the existing system generally works and saying he does not know how many investors may mistakenly believe they own shares.

Backpack’s unified margin account can support borrowing and, Feronte said, may let users borrow against assets such as Apple stock instead of selling them, potentially avoiding a taxable sale; leverage still carries risk. He also described broader access to money markets as a possible retail benefit, given that traditional access is tightly gated to high-net-worth individuals. For professional traders, unified margin can improve capital efficiency across strategies such as interest-rate arbitrage and basis trades. Crypto’s 24/7 markets can settle in real time and liquidate collateral immediately below a threshold, unlike traditional markets that may allow about a day to meet a margin call and can pursue traders personally for repayment. Feronte expects similar risk systems to extend to tokenized currencies, equities, funds, real estate, and bonds.

The team moved to Japan three years earlier after seeing an underrecognized market with potential, and bet in 2023 that crypto would grow rapidly there. Feronte cited Japan’s history in crypto, including Binance starting in Tokyo and more than 50% of global Bitcoin trading volume coming from Japan in 2017; hacks including Mt. Gox contributed to regulation that pushed activity offshore. He said Japan’s current crypto tax rate is 55% and expects it to be codified in 2026 and take effect in 2027 at 20%. He also called a former rule requiring exchanges to hold cash matching the USDC on their platforms infeasible for large dollar balances. The host said FTX spent about $800 million to acquire licenses now held by Backpack, which Backpack acquired at a fraction of that cost. Feronte stressed that licensing still requires systems, cybersecurity, risk-engine architecture, custody, operational controls, legal, and compliance work, while the team’s prior experience helped it build quickly despite capital constraints.