Free Market Opinion
US Regulators Probe 200+ Firms Over Unusual Trading Ahead of Crypto-Treasury Deals
US regulators are reportedly probing more than 200 firms with crypto treasuries over insider trading.
The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) raised concerns after observing unusually high trading volumes and sharp stock-price gains in the days before the companies’ announcements.
A Regulatory Sweep
Recent reports revealed that federal regulators are now scrutinizing over 200 companies that have adopted crypto purchases as a core corporate strategy, facing allegations of insider trading.
Although the specific names of the firms weren’t disclosed, the news surfaced as more corporations adopt an aggressive, MicroStrategy-inspired playbook for crypto accumulation. The SEC reportedly launched these investigations after observing notable trading volume and stock price surges just before the public announcements.
To follow up on this, the regulator warned the firms, specifically cautioning them against violating Regulation Fair Disclosure. This rule forbids sharing nonpublic information selectively with certain investors who might use it for trading.
When companies privately fund large cryptocurrency purchases by engaging outside investors, they require these investors to sign non-disclosure agreements. However, sharp spikes in the company’s stock price immediately before the public announcement suggest this confidentiality was broken.
The Corporate Crypto Playbook
CoinGecko data shows that 108 companies currently own Bitcoin. However, these corporate treasuries have expanded beyond Bitcoin to include altcoins such as Ethereum, Solana, and Litecoin in recent months.
Many companies use a “flywheel” strategy by privately raising capital via debt and equity to finance massive crypto purchases. Because these financing and purchasing plans are highly sensitive and nonpublic, any premature disclosure provides a major trading advantage.
The flywheel model uses capital—frequently raised through cheap debt like convertible bonds—to buy large amounts of crypto. This boosts the company’s stock price because investors treat the shares as a magnified way to bet on the crypto’s rising value.
This higher stock price, in turn, allows the company to raise more capital for the next round of crypto buying, creating a high-leverage feedback loop. Any leak about an imminent capital raise or purchase immediately affects this sensitive mechanism.
Written & Edited by
Camila Grigera Naón
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Ether Treasury Company SharpLink Gaming Buys Back $15M in ‘Undervalued’ Shares
The repurchase happened as the firm’s stock price fell below the net asset value of its underlying ether holdings.
SharpLink Gaming (SBET), a Nasdaq-listed ether (ETH) treasury firm helmed by Ethereum co-founder Joe Lubin, said on Tuesday it has bough back $15 million worth of shares, noting the stock’s market cap is below the company’s $3.6 billion in ETH holdings.
The Minneapolis-based firm repurchased about 939,000 shares at an average price of $15.98 as part of its share buyback program, according to a press release.
“The Company believes its common stock is significantly undervalued in the market and believes buybacks represent a compelling investment that underscores confidence in its long-term strategy and growth prospects,” said SharpLink.
The stock was up 3.6% in pre-market trading on Tuesday alongside this news and more than a 1% rise in the price of ETH since yesterday’s close.
SharpLink holds about $3.6 billion worth of ETH with nearly all of its holdings staked, providing an income stream, the firm said. The stock currently trades at a 0.87 multiple of net asset value (mNAV), according to SharpLink dashboard, limiting its ability to raise funds by selling shares for ETH purchases as part of its strategy.
Executives said that the firm has not tapped its at-the-market facility to sell shares while trading below net asset value, noting such moves would dilute ETH holdings per share, a key metric for the firm.
Digital asset treasury firms plunged sharply over the past weeks as crypto markets cooled off. Rival digital asset treasury firm BitMine (BMNR), which holds nearly $9 billion in ETH, also fell below the 1 mNAV threshold.
BMNR and SBET have each decline about 60%-70% since their July highs.
By Krisztian Sandor, AI Boost|Edited by Stephen Alpher
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