Crypto Treasury Craze: The "Legal" Facade of Insider Trading
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Crypto Treasury Craze: The "Legal" Facade of Insider Trading
Insiders' elite "exit," or a new phase of industry innovation?
Navigating Web3 tides with focused insightsAuthor: RT Watson
Compiled by: TechFlow
Quick Overview
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Meme coin digital asset treasuries (DATs) are raising billions of dollars from investors to promote specific tokens while generating profits through public companies.
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Supporters argue DATs increase token visibility, drive adoption, and deliver returns; critics warn the model may signal that major holders are quietly planning exit strategies.
Digital Asset Treasuries (DATs) have become one of the most controversial trends in crypto. Supporters believe they can boost token adoption and generate strong returns; critics worry the model may suggest large holders are covertly orchestrating exit plans.
With billions of dollars flowing in, high-profile figures such as former U.S. President Donald Trump, Binance founder Changpeng Zhao, and Tron founder Justin Sun are getting involved.
Brian Rudick, Chief Strategy Officer at Solana treasury firm Upexi, is among the strongest advocates for DATs.
"Digital asset treasury firms are mostly one-way buying vehicles that can push up token prices, attracting users, developers, and decentralized applications (dApps)," Brian Rudick told The Block. "They can significantly raise awareness of a token ecosystem, especially among traditional investors and institutions."
The concept of DATs traces back five years to Michael Saylor's decision to transform his publicly traded software company MicroStrategy—now renamed Strategy—into a Bitcoin accumulator. After Bitcoin’s price surged dramatically, particularly by the end of last year, shareholder value at Strategy grew exponentially. The company’s Bitcoin-centric strategic pivot suddenly appeared brilliant, and Strategy’s success inspired widespread emulation across the crypto space.
Image source: The Block Data.
DAT enthusiasm began spreading slowly in 2024, initially triggered by other companies announcing Bitcoin treasury strategies. Soon after, these firms started accumulating other popular cryptocurrencies like Ethereum and Solana.
Eventually, this trend gave rise to a new type of DAT—one focused on meme coins, directly tied to the individuals or organizations behind the tokens. However, the nature of these deals, along with close relationships between newly formed DATs and token developers, key supporters, and major holders, has drawn significant scrutiny. These DATs are often small-cap Nasdaq-listed companies with no prior connection to crypto, raising questions about their motivations.
"Many digital asset treasuries involve insiders who were already connected to the target assets at the time of formation. These structures clearly raise ethical concerns about who gets privileged access and what information shapes their formation and strategy," said Steven Zheng, Research Director at The Block.
Digital Asset Treasuries Backed by the Trump Family: The Untold Story Behind an Unlisted Token
World Liberty Financial, a cryptocurrency venture backed by the Trump family, announced this week plans to raise $1.5 billion to fund its WLFI governance token, which is currently non-tradable and not listed on any exchange.
Shortly after, Zach Witkoff, co-founder of World Liberty, revealed on a CNBC television interview the details of transforming a small tech company, ALT5, into a WLFI accumulation machine.
"If you look at pre-market trading... our token (WLFI) is trading between $0.35 and $0.90, implying a fully diluted valuation between $35 billion and $90 billion," Witkoff said during the CNBC interview. "ALT5 acquired these tokens at a valuation of $0.20. Taking a simple average of pre-market trades, the valuation is around $0.56. That means ALT5 bought the tokens at roughly a 64% discount based on their acquisition price, which we believe will create substantial value for shareholders."
World Liberty is leading the $1.5 billion funding round, effectively exchanging WLFI tokens for shares in ALT5. Additionally, the company stated that Eric Trump serves on the ALT5 board alongside Witkoff. President Trump and his sons are all supporters of the World Liberty project.
World Liberty did not respond to requests for comment.
DAT Discounts for The Open Network
This month, Nasdaq-listed Verb Technology announced plans to raise $558 million to increase holdings of Toncoin, the native token of The Open Network (TON) blockchain. This multimillion-dollar investment includes participation from venture capital firms such as Kingsway Capital, Ribbit Capital, and Vy Capital. TON is an exclusive blockchain linked to Telegram, the instant messaging app operated by Pavel Durov, who stated in 2023 that he holds Toncoin.
According to an investor presentation filed with the U.S. Securities and Exchange Commission (SEC), Verb Technology—renamed TON Strategy—expects to benefit from purchasing TON at a discounted price. The company stated in the presentation: "Based on existing relationships between TON Strategy’s board, management, and advisors within the TON ecosystem, we believe we can acquire a significant supply of TON at approximately a 40% discount."
A TON spokesperson said Kingsway Capital, Vy Capital, and Ribbit have been bullish on TON since at least March this year, when all three firms jointly participated in a large-scale purchase of $400 million worth of Toncoin from "early investors." Manuel Stotz, CEO of Kingsway Capital, now serves as chairman of the TON Foundation and executive chairman of the newly formed DAT and TON Strategy.
Some veteran crypto industry insiders point out that deals like TON Strategy and World Liberty exemplify familiar closed-loop operations within crypto.
"Information in the gray areas of crypto could very well be considered insider information in the stock world," said an anonymous industry insider.
Both TON Strategy and the TON Foundation declined to comment.
More High-Profile DAT Deals Draw Scrutiny
World Liberty and TON Strategy are not isolated cases. Similar projects exhibit tight transactional ties, including those involving Binance founder Changpeng Zhao and Tron founder Justin Sun.
In Zhao’s case, his family investment office led a $500 million deal to transform Nasdaq-listed CEA Industries into a BNB treasury. BNB is the native token of the blockchain created by Binance. Earlier this year, Zhao stated that 98% of his crypto assets are held in BNB.
In June, SRM Entertainment, a Nasdaq-listed toy manufacturer, announced a $100 million securities purchase agreement with a private investor to launch a DAT strategy focused on accumulating TRX, the native token of the Tron network. At the same time, Tron founder Justin Sun was appointed as an advisor to the company.
SRM Entertainment later rebranded as Tron Inc. and now holds 365 million TRX on its balance sheet, making it the largest publicly traded holder of TRX. Last month, this Sun-affiliated DAT filed a statement planning to issue up to $1 billion in mixed securities to purchase more TRX.
Hyperliquid DAT Sees Early Stock Surge
The DAT deal for Hyperliquid’s native token HYPE also involves key players, with Paradigm—the project’s venture backer—helping structure the transaction. The HYPE treasury is being established through Sonnet BioTherapeutics, Inc., a biotech firm focused on "oncology" transitioning into the DAT model. The company has since been renamed Hyperliquid Strategies Inc.
Almost two weeks before the transformation announcement, Sonnet’s stock had hovered between $1.00 and $1.50 per share throughout the year. Then, after selling $2 million in convertible bonds to qualified investors, its share price began rising. Amid increased trading volume, Sonnet’s stock surged over 300%. Later, according to Yahoo Finance, its price jumped again to nearly $10 following the announcement of its shift toward a HYPE treasury.
"We’ve heard strong institutional demand for investing in Hyperliquid, but the native token HYPE has been hard to access in the U.S. We’re very excited about this treasury strategy and believe it will contribute to the Hyperliquid ecosystem in multiple ways over time," said Matt Huang, co-founder of Paradigm, on the day of the announcement.
In mid-July disclosures, the companies revealed the DAT is expected to hold approximately 12.6 million HYPE tokens, valued at around $583 million at spot prices. However, the new ownership structure of this DAT is complex: Sonnet merged operations with Rorschach I LLC, a new entity formed by Atlas Merchant Capital LLC and its affiliate Paradigm, along with other sponsors.
Rorschach currently owns 98% of Sonnet—now Hyperliquid Strategies. Institutions including Galaxy Digital and Pantera Capital also participated in the creation of this DAT.
In such deals, sharp stock increases before announcements may further fuel suspicions that insiders are unfairly profiting.
"This closed-loop economy phenomenon will give skeptics of crypto something to talk about for years," Kadan Stadelmann, CTO of Komoto, told The Block regarding DAT deals tied to founders and large holders.
Kadan Stadelmann, CTO of Komoto, offered sharp criticism of crypto treasury operations. He said: "When treasury companies take money from VCs or foundations to buy tokens those same VCs already hold, this isn’t asset management—it’s creating exit liquidity. It’s self-dealing disguised as capital deployment."
In response, Paradigm declined to comment, and representatives for Hyperliquid Strategies have not responded to requests for comment.
In contrast, Mara Schmiedt, CEO of Alluvial, expressed a more optimistic view. She believes crypto projects turning to public companies present an opportunity to enhance accountability.
"Publicly registered companies must comply with strict disclosure requirements and are expected to maintain strong conflict-of-interest policies. When these entities engage in crypto treasuries, the accountability they bring can set higher standards for the entire ecosystem," she told The Block.
Image source: The Block Data.
"Insider Trading Is a Crime"
Recently formed SUI treasury companies appear to be actively crafting narratives to build investor trust.
"Insider trading is a crime," Stephen Mackintosh, Chief Investment Officer at Mill City Ventures, told The Block. He added that the SUI-focused DAT he supports did not purchase any locked tokens from investors hoping to exit lock-up periods early.
At the end of July, Mill City Ventures, a Nasdaq-listed short-term non-bank lender, pivoted into a SUI treasury strategy through a $450 million private placement. In addition to joining Mill City’s new leadership team, Mackintosh is also co-founder of London-based hedge fund Karatage, the lead investor in the private placement.
Mackintosh disclosed that Mill City has reached an agreement with the SUI Foundation to purchase SUI tokens at a discount, though so far the discount appears relatively small, especially compared to deals like World Liberty and TON Strategy.
This week, the SUI treasury company announced it acquired approximately 5.6 million SUI tokens at an average price of $3.65, bringing its total holdings to nearly 81.9 million. This price is only slightly below SUI’s previous day trading range of $3.80 to $3.90.
Mackintosh maintains long-standing connections with both the SUI Foundation and developers at Mysten Labs, the underlying technology provider. He said his team’s shares will be locked up for 12 months to demonstrate long-term commitment to the "SUI community, investors, and shareholders." He also noted that tokens purchased by the treasury from the SUI Foundation will be locked for about two years.
"We believe SUI assets will compound over the next decade," Mackintosh said. "This is exactly what Michael Saylor demonstrated—you need to buy scarce assets."
Update: Removed unnamed references to "sponsors" in Hyperliquid Strategies and clarified that Galaxy Digital and Pantera Capital participated in the treasury’s creation. Also added further details about Sonnet BioTherapeutics increasing its stake prior to announcing its HYPE treasury strategy.
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