One morning last year, Australia’s youngest billionaire Ed Craven woke up to the news that one of his celebrity partners, the rap star Drake, had won $38mn in Bitcoin gambling on his cryptocurrency betting site Stake.com.

“That was a tough morning,” recalled Craven. But on the whole, his business has been on a winning streak since the start of the pandemic thanks to wealthy gamblers from across the globe drawn to the anonymity of betting in crypto.

Stake.com, which was launched in 2017 by Craven and his US co-founder Bijan Tehrani, has grown almost unnoticed to become the world’s seventh largest gambling group by revenues, eclipsing established brands such as DraftKings and 888, according to estimates compiled by consultancy Regulus Partners for the Financial Times.

In 2020 it generated gross gaming revenues, a key industry metric, of just $105mn. Last year the figure was nearly $2.6bn, according to company accounts seen by the Financial Times.

“There were so many high rollers. I’d be sitting there with the team and one of them would be like: This woman in Singapore has just put her hand down for a million dollars against this guy in Russia who’s done the same,” said a former employee who worked at the company during its early days.

Craven, who is 27, met Tehrani, 28, more than a decade ago while playing online fantasy game RuneScape.

They experimented with gambling in this virtual world, inviting other players to bet digital gold coins, before they were banned for doing so. Their first online betting site came into being in 2013. The windfall from early crypto investing, when Bitcoin was priced at below $20, has bankrolled their business ventures ever since, the pair said.

Following the example of crypto gambling site SatoshiDice, Craven and Tehrani in 2013 created Primedice, a simple online dice game that allowed players to bet in crypto. This worked well and in 2017 they launched a fully-fledged gambling platform offering casino games and sports betting under the name Stake.com.

Craven told the Financial Times that lavish marketing spending was important for its growth and to overcome the “difficult stigma” of being a platform that mixes crypto and gambling.

“It helped reassure customers that . . . these guys are not going to run off with my $50,” said Craven. Those doubts could be addressed by creating “[a] brand that could be trusted which is . . . quite difficult to do when you are up against some very large competitors . . . who are very established”, he added.

“By spending a lot on advertising, you create an implied warranty for your product,” said Khalil Philander, an assistant professor at Washington State University who researches crypto-gambling.

High-profile sponsorship deals with the likes of Premier League club Everton and Alfa Romeo’s F1 team, plus celebrity endorsements have also helped it pull ahead of bigger rivals. Drake was a big-spending early adopter and last year signed a $100mn a year endorsement deal with the company, according to two people familiar with the details.

Craven also hosts a two-hour live stream every week where he answers customer queries directly. A large portion of the company’s 370 staff are focused on catering for VIP and “super” VIP gamblers, a core part of the business that remains directly under Craven’s oversight.

He acknowledges that the business has changed a lot from its beginnings. “I think what Stake is today vs what it was when it was created is a very different landscape,” he said.

On several occasions in its early days, he hired private security protection because he was worried about his safety, according to two former employees. “There was a lot of crazy shit that went on,” said one of the former employees.

A former business partner from that time, Christopher Freeman, a childhood friend of Tehrani, is suing him and Craven for $400mn, alleging the pair stole his ideas and bullied him out of the business. Craven and Tehrani have filed a motion to dismiss the case.

In the run-up to the launch of Stake.com, the founders also took advice from Canadian lawyer Dan Friedberg, who would later become chief compliance and regulatory officer of collapsed crypto exchange FTX.

A class-action lawsuit filed in a Florida federal court accuses Friedberg and other FTX employees of helping founder Sam Bankman-Fried cover up $8bn in customer losses. Friedberg is now co-operating with US prosecutors but has not been charged over the FTX scandal.

Before his involvement with Stake.com, Friedberg also advised executives at Ultimate Bet, which was fined by Canadian regulators in 2008 after staff were caught using software to spy on customers’ cards and bet against them. Friedberg was not accused of any wrongdoing.

Craven said Friedberg worked largely on Primedice but added that “a lot of [the work to set up Stake.com] was ran past” Friedberg, who “took on the position of trying to analyse . . . what the legal landscape looked like, and he tried to give us the best advice possible on what is legal and what was not”.

A representative of Tehrani later contacted the FT to say Friedberg had only given the two founders “passing advice” on Primedice and they had “only ever had a few conversations” with the lawyer.

Friedberg declined to comment.

Unlike most of the big gambling groups, which do not accept crypto, many of Stake.com’s 600,000 regular users and 6mn registered accounts are located in “grey” markets such as Brazil, Japan and other countries in south-east Asia where the rules about online gambling on foreign sites are undefined.

It has a pending non-crypto gambling licence application in Australia and another nearing approval in the Canadian state of Ontario. It also has small non-crypto online gambling operations in the US and UK and recently acquired traditional gambling licences in Mexico and Paraguay.

Stake.com has its head office in Melbourne and is currently registered as a 50/50 partnership between EasyGo Solutions, an entity owned by Craven, and Tehrani. It has not yet filed full accounts but Craven said the company was “working extremely closely” with the Australian Taxation Office to resolve this.

Despite being headquartered in Australia, Stake.com is licensed in Curaçao, a Caribbean island that attracts operators with its light-touch gambling regulation. “They go about things in a different manner,” said Craven.

Freeman’s lawsuit against Stake.com cites evidence of the company encouraging gamblers in the US, where access to the site is blocked to comply with strict gambling rules, to use virtual private networks to get around the ban.

Craven said: “It would obviously be naive to assume that we have absolutely zero customers in the United States, but I can safely say that we do not have a presence there of any significance [and] we actively work to remove any customers from the United States.”

Nigel Eccles, founder of gambling company FanDuel, who has launched his own crypto betting site BetDex, said: “In the gaming space it’s become a proven model, you start in the grey market and you grow to a huge size, and then you find a path to becoming more regulated.”

Ingo Fiedler, co-founder of Blockchain Research Lab, said much of Stake.com’s success may be down to crypto and gambling being natural bedfellows, both of them attracting customers willing to take risks.

“The crypto day trader who uses crypto for speculation . . . is a cluster that resembles quite remarkably the typical gambler,” he said. The subdued crypto market after the spectacular crash of last year might also push more traders towards gambling platforms, he added.

Eccles attributes Stake.com’s success to its aggressive marketing and being the “first truly global, crypto-only” gambling site. Drake, he added, “is the essence of the brand: a young, male sports enthusiast with a very high tolerance for risk”.