Citi-backed Talos acquires crypto risk management platform Cloudwall

Talos, a crypto trading software provider backed by heavyweights including Citibank and Andreessen Horowitz (a16z), has fully acquired Cloudwall, a crypto risk management platform.

The size of the deal wasn't disclosed, but Talos said Cloudwall will improve its existing crypto portfolio management system to help its institutional clients manage risks and optimize their portfolios.

"Cloudwall's focus has been very much rooted in building the tools that institutions need to manage a portfolio of digital assets, while Talos has focused on trading technology as well as complementary pillars of a PMS, namely portfolio engineering tools for portfolio construction and tools for PL, treasury, and position management," Talos co-founder and CEO Anton Katz told The Block, adding: "Therefore, the acquisition was a natural step forward in Talos' mission to deliver a comprehensive institutional-grade PMS."

Founded in 2021, Cloudwall's cloud-based platform allows users to run various risk models and have a clear view of their risks, enabling them to decide which risks they want to gain exposure to and which ones to hedge, Katz said. "Given the growing relevance of risk tracking and management in the evolving digital assets landscape, these tools are becoming a crucial component in our clients' toolkit," he added.

The Talos-Cloudwall deal

Talos and Cloudwall had been in talks for a few months regarding the acquisition itself, Katz said — adding that Talos had been familiar with Cloudwall since its inception and had been discussing ways the two firms could partner for a long time.

"Talos and Cloudwall share a view that in the future all assets will be digital assets," Kyle Downey, co-founder and CEO of Cloudwall, said in a statement. "Risk is fundamental to finance, whatever the asset class, and digital assets are no exception. That's why we're excited to continue our mission of building the risk management defenses that institutions need to trade digital assets — under the auspices of Talos." 

The deal has been completed, with no pending approvals, Katz said.

While the size hasn't been disclosed, it appears to be a small-sized transaction. Cloudwall raised a seed funding round worth $6.3 million in 2022 from investors including LocalGlobe and Illuminate Financial.

Cloudwall has offices in New York City and Singapore and appears to have a headcount of fewer than 50 people, according to its LinkedIn page . Katz declined to comment on Cloudwall's specific headcount but said a proportion of its employees will join Talos upon the merger.

Talos was valued at $1.25 billion in 2022

Cloudwall is Talos' second acquisition after D3X Systems last year. D3X improved Talos' capabilities in portfolio engineering, including tools for portfolio optimization, strategy backtesting, portfolio rebalancing and risk and return attribution, Katz said. With Cloudwall's acquisition, Talos will expand its PMS across spot, futures, perps and options, Katz added.

Talos was valued at $1.25 billion in 2022, when it raised $105 million in a Series B funding round. Besides Citibank and a16z, its investors include Wells Fargo Strategic Capital, BNY Mellon, PayPal Ventures, Castle Island Ventures and Fidelity Investments.