Bloomberg Chief Financial Writer: The Underlying Logic Behind U.S. Listed Companies' Frenzied Purchase of Cryptocurrencies
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Bloomberg Chief Financial Writer: The Underlying Logic Behind U.S. Listed Companies' Frenzied Purchase of Cryptocurrencies
"The crypto circle keeps playing the U.S. stock market, and the U.S. stock market falls for it time and again."
Navigating Web3 tides with focused insightsBy: Matt Levine
Translation: Odaily Planet Daily jk
Crypto Treasury Companies
Last Tuesday, SharpLink Gaming Inc. was still a company focused on online marketing for sports betting, trading at around $2.91 per share with a market cap of only about $2 million. Though technically still listed on Nasdaq, it had been barely hanging on. Just weeks earlier, it had conducted a reverse stock split to keep its share price above the Nasdaq’s $1 minimum requirement and failed to meet Nasdaq’s basic shareholder equity threshold of at least $2.5 million.
So that day, SharpLink announced a new stock offering to raise $4.5 million at $2.94 per share. Officially, the funds would be used to “regain compliance with Nasdaq’s minimum shareholder equity requirements.” But the company added: “We may use a portion of the proceeds to purchase cryptocurrency as part of a treasury strategy we are considering.”
To be honest, this isn’t surprising. Technically, SharpLink is a public company, but by real-world standards, it's more like a "public shell"—with a $2 million market cap and annual revenue in the low millions, it's hard to justify the operational and compliance costs of being publicly listed. In the past, this was a problem.
But in 2025, this has become an opportunity. SharpLink now possesses two highly sought-after yet relatively scarce assets in today’s market:
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It has a U.S. public listing shell;
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And it hasn’t really done much with that shell.
This makes it an ideal candidate for transformation into a “crypto treasury company.” As I’ve often said, U.S. stock markets are willing to pay over $2 for every $1 worth of crypto assets. Crypto entrepreneurs have long recognized this. If you hold a large stash of Bitcoin, Ethereum, Solana, Dogecoin, or even TRUMP, the best move is to put them inside a U.S. public company and sell them at a premium to secondary-market investors.
But to do this, you first need a public company. Such shells are scarce—most quality ones are already busy. If you call Apple Inc. and say, “We want to merge our Dogecoin holdings with your company to make them more valuable,” Apple will surely say no.
The real opportunities lie with marginal public companies—they’re still listed, but just barely. These companies’ phones are ringing off the hook these days.
Which brings us to this press release:
SharpLink Gaming announces a $425 million private placement, officially launching its Ethereum treasury strategy…
SharpLink will continue operating as a company focused on providing performance-driven online marketing services to the U.S. sports betting industry.
According to the announcement:
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Following the private placement, SharpLink will formally launch its Ethereum Treasury Strategy;
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Joseph Lubin, founder and CEO of Consensys and co-founder of Ethereum, will become Chairman of SharpLink’s Board upon completion of the private placement;
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The round includes participation from major crypto VCs and infrastructure firms such as ParaFi Capital, Electric Capital, Pantera Capital, Arrington Capital, Galaxy Digital, Ondo, White Star Capital, GSR, Hivemind Capital, Hypersphere, Primitive Ventures, and Republic Digital.
In other words, Consensys—a blockchain software firm led by an Ethereum co-founder—wants to manage a $425 million Ethereum asset pool, and capital markets will value it far above its intrinsic worth. SharpLink happens to be the perfect “shell” to achieve this. So Consensys and its co-investors will inject $425 million to buy SharpLink shares at $6.15 each, and SharpLink will use the funds to purchase Ethereum (ETH).
At market open today, SharpLink traded at $33.93, rising to around $35 by 1:30 PM, giving the company a $2.5 billion market cap. In other words, a $425 million ETH position is now valued at $2.5 billion in the U.S. stock market.
Notably, SharpLink does not currently hold any Ethereum. Investors provided dollars, not ETH. This isn’t “we already own a lot of ETH, let’s take it public”—it’s “since the U.S. stock market is willing to pay $2 or even $6 for $1 worth of ETH, why not exploit this arbitrage?”
In a way, this is almost an open arbitrage opportunity. Theoretically, anyone with a few hundred million dollars could buy crypto, place it into a public shell, and instantly book a 5x+ paper profit on U.S. markets. Beyond capital, all you really need is a small public company willing to “hold coins.”
Remember that New Jersey snack shop that briefly had a $2 billion fully diluted market cap? It was just too early. Actually, that snack shop (or rather, the shell behind it) existed precisely for this kind of transactional model: a listed shell paired with a placeholder business (like a snack shop), ultimately meant to reverse-merge with a private company—likely foreign—and go public. Why those snack shop guys manipulated the stock and ended up in jail remains unclear to me, but that’s unrelated to the core logic. The key is finding the right merger partner.
That snack shop got shut down before the “crypto treasury company” model took off—but good grief, if it had survived until today, it could’ve pulled off an incredible deal. Imagine if that New Jersey snack shop merged with a $425 million Ethereum pool—its $2 billion valuation wouldn’t have seemed so crazy after all. Now, all it takes is a few hundred million in crypto and a tiny public company to command a multibillion-dollar valuation.
Back to SharpLink: Its stock rose 35% on Thursday, another 79% on Friday, and the deal was only officially announced today. I suspect possible leaks or insider trading, but I won’t jump to conclusions. SharpLink had openly discussed considering a crypto treasury strategy and was clearly an ideal “candidate shell” (listed, but with minimal operations). Even without insider info, one could reasonably speculate: “This small company will probably announce something crypto-related soon, and the stock could surge hundreds of percent—maybe I should buy some now.” Of course, this isn’t investment advice, and my use of “reasonable” here isn’t what traditional finance would call “rational.”
The whole situation is absurd, but let me highlight three particularly absurd things.
First: Is this trick still working?
I’ve written extensively over recent months about “crypto treasury companies”—MicroStrategy Inc. was basically the pioneer, doing this for years. Recently, this model has exploded. Intuitively, it shouldn’t keep succeeding.
MicroStrategy is a large public company with a professional investor relations team, effective retail messaging, actual Bitcoin holdings, first-mover advantages, diversified funding options, inclusion in leveraged ETFs and indices—the works. For certain investors (e.g., mutual fund managers, some retail traders) who want Bitcoin exposure but can’t buy crypto directly or via ETFs, MicroStrategy might genuinely deserve a valuation premium.
But now, dozens of copycat “mini-MicroStrategies” are receiving wild market premiums. The market’s appetite for these “new crypto treasury companies” seems endless. I cannot explain this phenomenon at all.
A month ago, I wrote: “It feels like crypto is repeatedly conning the stock market, and the stock market keeps falling for it.” That feeling is stronger than ever.
Second: Are people still doing this?
This isn’t entirely surprising: Last month, I wrote, “If you run a crypto hedge fund and haven’t acquired a defunct or minimally-operating U.S. public company to play this arbitrage game, you’re mismanaging your fund.”
For any crypto-adjacent entity, the current lowest global cost of capital comes from buying a public shell and converting it into a crypto treasury model. We’ve already seen Tether, SoftBank, Bitfinex, Nakamoto Holdings, and others enter this space. The Financial Times even reported that Trump Media & Technology Group is joining—unsurprising, frankly. It’d be weirder if they didn’t.
Yet, because of this, nearly all participants in this game (besides MicroStrategy) are small, half-abandoned companies. Real operating firms like Apple—with real businesses, cash flows, and products—won’t bother with gimmicks that inflate their stock price overnight.
For some crypto founders, it might be similar. We can assume Ethereum creator Vitalik Buterin cares more about improving the Ethereum protocol than packaging ETH for sale to stock investors. But for many, the valuation premium is just too tempting to resist.
Third: How do you cash out?
This morning, SharpLink “created” $2 billion in paper profit out of thin air. Now what?
Theoretically, this profit was generated by the private placement investors (e.g., Consensys and its partners). But they likely can’t immediately cash out: such private deals usually have lock-up periods, and shares must be registered before sale. Plus, they collectively own 97% of SharpLink—if they dump it, the stock will collapse.
For the entire year before the announcement, SharpLink averaged only about 75,000 shares traded daily. At today’s volume, selling their entire stake would take over three years.
Though the market values their $425 million ETH purchase at $2.5 billion, they can’t actually withdraw that $2.5 billion. The paper profit is trapped in market valuation.
Still, this is worth studying. Modern finance seems to have found a reliable way to generate billions in market cap with minimal effort. It’s not “anyone can do it in an hour,” but clearly many have realized the barrier is low.
But if you can’t turn paper wealth into real cash, it’s ultimately just a magic trick. You’re nominally a billionaire holding 97% of SharpLink Gaming—but remember, a week ago the whole company was worth $2 million. You’d naturally worry how long this bubble lasts.
You’d definitely want to “take some profits,” but dumping shares on the open market doesn’t seem viable.
Of course, there are “boring but realistic” answers: “They now control a multi-billion-dollar company with ultra-low cost of capital; they can keep issuing new shares to the public to buy more ETH, expanding their ‘empire’ and influence; when you run such a company, you can pay yourself a huge salary.”
Sounds plausible, but these people already had hundreds of millions—they didn’t do this just for a nice job.
The real question is: How do they extract that $2 billion?
I don’t have a great answer—if I did, I’d probably be doing it. But I want to point out how deeply “crypto” this problem is: a classic crypto dilemma now imported into the stock market via a new wave of “crypto treasury companies.”
It’s the classic crypto wealth story template:
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You create “magic beans” (e.g., a new token) and hold most of them;
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Few beans trade, but prices are high, making the project’s total value look enormous;
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You appear to be a billionaire, but if you actually sell, the market crashes and you get nothing;
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“Paper wealth” brings perks—prestige, access, status—but you know the “magic bean market” won’t last, so you desperately want to cash out.
The most famous case is probably FTX’s collapse:
Sam Bankman-Fried (SBF) controlled FTX and Alameda Research, which were worth tens of billions on paper—but much of that value came from crypto assets they themselves created. In November 2022, as confidence in FTX evaporated, those tokens went to zero, wiping out the valuation.
I once wrote an article referencing a podcast conversation with SBF, where he discussed a crypto token and its “Box Token” model:
“If everyone thinks the Box Token is worth around $1 billion right now, then it basically is. Everyone books it that way. You can even use it to borrow: pledge the token in a lending protocol to get dollars. If you think its real value is maybe two-thirds of that, you can pledge part of it, pull out cash, never repay—and just get liquidated eventually. In a sense, it’s already a way to cash out.”
In crypto, if you hold $1 billion in “magic beans,” someone might lend you $500 million in real cash—possibly non-recourse.
But in the stock market… even if you control a crypto treasury company whose value surged 100,000%, with 97% ownership, it’s hard to borrow 50%, or even 10%, of its paper value.
But honestly, I’d try.
Applied Game Theory: Someone Actually Cashed Out, And...
In crypto, there’s a well-known case of someone successfully “cashing out” a batch of “magic beans.”
In October 2022, a trader calling himself an “Applied Game Theorist,” Avi Eisenberg, applied game theory to Mango Markets—a decentralized perpetual futures exchange—and executed a controversial arbitrage maneuver.
Mango Markets offers perpetual contracts on various crypto assets, including futures for its native token MNGO. Contract prices are settled via price oracles from multiple external exchanges: your P&L on Mango depends on spot price movements on those platforms.
Additionally, Mango allows users to borrow crypto against unrealized profits (paper gains) from their positions. For example, if you gain $100 on a contract, the platform might let you borrow $50 in crypto against that gain—as a non-recourse loan, meaning you owe nothing if you default.
Eisenberg’s move:
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Bought millions of dollars’ worth of long perpetual contracts on MNGO at Mango Markets;
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Simultaneously opened offsetting short positions, keeping net exposure flat;
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Bought large amounts of MNGO spot on the “reference exchanges” used by the contracts;
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Due to low MNGO liquidity, his buying sharply inflated its market price;
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This caused the value of his long contracts on Mango to surge;
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He then used the paper gains from these longs as collateral to borrow and withdraw large sums of crypto from Mango;
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Next, he sold MNGO back on the reference exchanges, crashing the spot price;
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This made his short positions more valuable;
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He again used the paper gains from the shorts as collateral to borrow more crypto from Mango.
In total, Eisenberg withdrew over $100 million in crypto assets from Mango Markets, according to official disclosures.
In simple terms, it was almost as if Eisenberg “stole” $100 million from Mango. By manipulating the MNGO price, he artificially inflated his contract positions and used the inflated paper value as collateral to extract real funds. Since the loans were non-recourse—standard in DeFi—he never had to repay.
Of course, he was eventually arrested.
We’ve discussed this case multiple times:
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Right after the trade;
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When he later posted a “Statement on Recent Events” on Twitter, admitting he did it but claiming it wasn’t wrong because “all actions were legal under the protocol’s design, even if developers didn’t foresee the consequences of certain parameters”;
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And when he was arrested, with U.S. federal prosecutors clearly disagreeing with his explanation.
Eisenberg was convicted by a jury last April. But last Friday, the judge overturned the conviction.
According to Bloomberg:
U.S. District Judge Arun Subramanian overturned Avraham Eisenberg’s convictions for fraud and market manipulation last Friday and acquitted him on a third charge. The judge ruled that evidence presented at trial was insufficient to prove Eisenberg made false statements to Mango Markets. Mango Markets is a decentralized financial platform powered by smart contracts.
(That’s the source of the opinion.)
This case highlights two key issues:
First, jurisdiction: Eisenberg was prosecuted in New York, but his so-called “applied game theory” operation occurred in Puerto Rico, targeting crypto platforms that are technically borderless.
The three reference exchanges he used to manipulate MNGO prices were:
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FTX, headquartered in the Bahamas;
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AscendEX, based in Romania;
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Serum, a decentralized exchange with no clear headquarters.
Mango Markets itself shows no direct link to New York.
There’s a longstanding assumption: “If you commit a financial crime, you’ll probably end up tied to New York,” allowing federal prosecutors there to claim global reach. But this case shows crypto is pushing against those jurisdictional limits.
In crypto circles, there’s a stereotypical belief: “Put it on-chain, and you escape national laws.” Reality is more complex.
Eisenberg was tried in New York, but could theoretically face charges in Puerto Rico or Romania. Yet placing transactions on-chain may indeed shield you from the grasp of the U.S. Attorney’s Office for the Southern District of New York (SDNY). In crypto, that counts as a sophisticated maneuver.
Either way, this is the first key issue: Eisenberg’s “commodity manipulation” charges were overturned because prosecutors chose the wrong venue. The DOJ could retry the charges in Puerto Rico if they wish.
But beyond commodity manipulation, he was also convicted of wire fraud—a charge fully dismissed, with no right to re-prosecution.
This leads to the second core issue: While Eisenberg’s actions constituted market manipulation, whether they amounted to “fraud” is unclear.
Under U.S. commodities law (which applies to crypto tokens like MNGO), using “any manipulative device” in derivatives trading constitutes commodity manipulation—this is how Eisenberg was charged. But “wire fraud” has a higher bar: it requires false statements via communication systems to obtain money.
The court stated:
“To establish fraud, there must be proof of a material misrepresentation.” The judge concluded that whatever Eisenberg did, he didn’t lie to anyone.
The government argued Eisenberg committed fraud in two ways (per the ruling, citations omitted):
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He misled Mango Markets into believing he was applying for a legitimate crypto loan while intending to steal funds;
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He misrepresented the value of his collateral, making the platform believe it was valuable when it was artificially inflated and unsupported.
But neither constitutes lying.
Clicking “borrow” without intent to repay may seem fraudulent at first glance, but not in the context of a crypto platform offering non-recourse loans.
In such systems, borrowers have no personal repayment obligation—platforms can only seize collateral. If collateral value drops below the loan amount, abandoning the position is standard. As the judge noted:
“What happens if a user borrows funds and their collateral value plummets? The system liquidates them. There’s no evidence that Mango Markets’ ‘borrow’ function implies any obligation to repay—or any other duty—even though the word might imply that in traditional contexts.”
So in other settings, hiding or distorting key information during loan negotiations might be fraud. But here, there were no terms, no negotiations—just one word: “borrow.”
Or as SBF put it: “You never need to repay; you just get liquidated eventually.”
As for “misrepresenting collateral value,” Eisenberg didn’t actually do that—Mango Markets calculated his collateral value based on market prices (even if he manipulated them).
Interestingly, this isn’t fraud, thanks to precedent from LIBOR manipulation cases:
Of course, Eisenberg knew his portfolio’s value was artificially inflated and unsustainable. So while his collateral valuation was technically “accurate” at the moment of borrowing (based on current prices), the government argued his representation was deceptive…
The government claimed Eisenberg implicitly told Mango Markets two things when borrowing:
First, that his collateral hadn’t been manipulated;
Second, that it was genuinely valuable.
Both, in the government’s view, were false.
But this conflicts with the Second Circuit Court of Appeals’ ruling in United States v. Connolly.
In Connolly, Deutsche Bank (DB) reported its interbank borrowing rates daily to the British Bankers’ Association (BBA).
The defendants—DB traders—sometimes asked LIBOR submitters to report rates favorable to their positions. Trial evidence showed other DB employees and the submitters themselves admitted that adjusting LIBOR for traders’ benefit was “wrong” at the time.
But the court rejected the government’s argument that these submissions implicitly certified “no trader interference.”
Even though market participants viewed trader manipulation as improper, the absence of explicit prohibitions was decisive. The court noted that while BBA later issued rules banning such behavior (just as Mango updated its protocol post-Eisenberg), “no such rules or bans existed during the early period covered by this case.”
We discussed Connolly in 2022: LIBOR was inherently a “made-up” number, so DB traders couldn’t be criminally liable for “getting it wrong.” The same logic applies to MNGO’s price.
In short, at least regarding wire fraud, platform terms and conditions are crucial. If Mango Markets had explicitly told users: “If you borrow against your position, you must certify you haven’t manipulated the market,” Eisenberg’s trade would be fraud. But it didn’t say that—or anything—so his actions weren’t fraudulent.
There’s a common crypto creed: “Code is law”—if a crypto system allows an action, you’re entitled to do it, even if developers didn’t anticipate the outcome. Under this view, traditional laws, social norms, or user agreements don’t matter; only the code matters.
But this ruling doesn’t fully endorse that. It means: code can become law. If you run a crypto platform and tell users “don’t manipulate, attack, or exploit,” then manipulators may face trouble. But if you run a platform saying nothing—just “this is how it works, proceed at your own risk”—then even if someone exploits a loophole, it’s legal, or at least not wire fraud.
This makes sense. I once wrote about Eisenberg’s move: “Imagine two market systems users can choose between”: one called “Nice Market” with clear rules against manipulation and insider trading; another called “Fun Market” where if you find a way to profit, it’s fair game. I suggested that since crypto systems are relatively disconnected from real-world finance (though that’s changing), they could serve as testing grounds for “Fun Markets,” provided participation is fully voluntary. Perhaps that’s the faint “actual rule” emerging from this case.
Still, none of this helps Eisenberg personally. As Bloomberg noted, when U.S. authorities arrested him for this crypto case, they discovered he had downloaded 1,274 child pornography images and videos between 2017 and 2022. He was sentenced in May this year to about four years for possessing child sexual abuse material.
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