SEC & FINRA Investigate Crypto Treasury Companies Over Unusual Stock Volatility

SEC & FINRA Launch Investigation into Crypto Treasuries

On September 24th, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) jointly announced an investigation into over 200 publicly traded companies that had announced crypto treasury plans. The reason? Unusual stock price volatility leading up to the announcements. Since MicroStrategy pioneered including Bitcoin on its balance sheet, the "crypto treasury" has become a buzzy financial alchemy in the U.S. stock market. Upstart stocks like Bitmine and SharpLink saw massive surges due to similar moves. According to data from Architect Partners, 212 new companies since 2025 have announced plans to raise approximately $102 billion to purchase mainstream crypto assets such as BTC and ETH.

However, this capital revelry has also sparked widespread skepticism as it pushed prices higher. MSTR's mNAV (market cap to net asset value ratio) fell from 1.6 to 1.2 in one month, and over two-thirds of the mNAV of the top 20 crypto treasury companies fell below 1. Allegations of asset bubbles and insider trading are emerging, posing an unprecedented regulatory challenge to this novel asset allocation trend.

How Do Crypto Treasury Companies’ Flywheels Operate?

The financing flywheel of treasury companies relies on the mNAV mechanism, which is essentially a reflexive flywheel logic that grants treasury companies a seemingly “infinite bullet” capability in a bull market. mNAV refers to the market net asset value ratio, calculated as a company's market capitalization (P) relative to its net asset value per share (NAV) multiple. In the context of treasury strategy companies, NAV refers to the value of the digital assets they hold. When the stock price P is higher than the net asset value per share NAV (i.e., mNAV > 1), the company can continue to raise funds and reinvest the raised funds into digital assets. Each increase in issuance and purchase will drive up the shareholding and book value, further strengthening the market’s confidence in the company’s narrative, driving the stock price higher. Thus, a closed-loop positive feedback flywheel begins to spin: mNAV rises → increase funding through issuance → buy digital assets → increase shareholding per share → enhance market confidence → stock price rises again. It is thanks to this mechanism that MicroStrategy has been able to continue raising funds to buy Bitcoin in recent years without significantly diluting shares. Once the stock price and liquidity are pushed high enough, the company can unlock a whole set of institutional fund entry mechanisms: it can issue debt, convertible bonds, preferred stocks, and other financing instruments to turn the narrative in the market into book assets, and then drive up the stock price again, forming a flywheel. The essence of this game is the complex resonance between stock price, story, and capital structure. However, mNAV is a double-edged sword. The premium can represent high market trust, or it can be just speculation. Once mNAV converges to 1 or falls below 1, the market switches from “enrichment logic” to “dilution logic.” If the price of the currency itself falls at this time, the flywheel will turn from forward rotation to a negative feedback cycle, causing a double kill of market value and confidence.

In addition, the financing of treasury strategy companies also relies on the premium flywheel of mNAV. When mNAV is in a discount state for a long time, the additional issuance space will be blocked. The business of small and medium-sized shell companies that are already in business stagnation or on the verge of delisting will be completely overturned, and the flywheel effect that has been established will collapse instantly. In theory, when mNAV

Does Insider Trading Exist?

SharpLink Gaming is one of the earliest cases in this round of “crypto treasury fever” that triggered market shock. On May 27, the company announced that it would increase its holdings of Ethereum by up to $425 million as reserve assets. On the day the news was announced, the stock price once soared to $52. However, strangely, the trading volume of the stock had increased significantly as early as May 22, with the stock price rising from $2.7 to $7. At that time, the company had not issued an announcement and had not disclosed any information to the SEC. This phenomenon of “stock price rising before the news is released” is not an isolated case. MEI Pharma announced on July 18 that it would launch a $100 million Litecoin treasury strategy, but it rose for four consecutive days before the news was released, with the stock price rising from $2.7 to $4.4, nearly doubling. The company did not submit major updates, nor did it issue a public press release, and its spokesperson declined to comment.

Similar situations have also occurred in Mill City Ventures, Kindly MD, Empery Digital, Fundamental Global, and 180 Life Sciences Corp, among others, which have shown varying degrees of abnormal trading fluctuations before announcing crypto treasury plans. Whether there is information leakage and advance trading has aroused the vigilance of regulators.

Will the DAT Narrative Collapse?

Arthur Hayes, consultant of Upexi, “Solana MicroStrategy”, pointed out that crypto treasury has become a new narrative in traditional corporate finance circles. He believes that this trend will continue to evolve in several mainstream asset tracks. However, we must see clearly: on each chain, there will be only one or two winners at most in the end. At the same time, the head effect is accelerating. Although there are more than 200 companies that have announced crypto treasury strategies by 2025, covering BTC, ETH, SOL, BNB, TRX and other chains, funds and valuations are rapidly concentrating in a very small number of companies and assets—BTC treasuries and ETH treasuries occupy the bulk of DAT companies. In each asset category, only one or two companies can really emerge. The BTC track is MicroStrategy, the ETH track is Bitmine, and the SOL track may be Upexi, and it is difficult for other projects to form a large-scale competition.

As Michael Saylor verified, there are a large number of institutional money managers in the market who want to gain exposure to Bitcoin risk. They cannot buy BTC directly, nor can they hold ETFs—but they can buy MSTR shares. If you can include a company that holds crypto assets in their “compliance basket,” these funds are willing to buy assets worth only $1 on the books for $2, $3, or even $10. This is not irrational; this is institutional arbitrage. In the second half of the cycle, newer issuers will emerge and resort to more aggressive corporate finance tools to pursue higher stock price elasticity. When prices fall, these practices will backfire.

Arthur Hayes judges that this cycle will see a major DAT accident similar to the FTX crash. By then, these companies will have accidents, and their stocks or bonds may appear at significant discounts, causing significant market volatility. Regulators have also noticed this structural risk. In early September, Nasdaq proposed strengthening the review of DAT companies. Today, the SEC and FINRA jointly launched an investigation into insider trading. These regulatory practices aim to reduce the space for insider trading, increase issuance thresholds and financing difficulties, thereby reducing the manipulation space for new DAT companies. For the market, this means that "fake dragons" will be cleared quickly, while real leading companies will continue to survive and even grow through narrative. To summarize, the narrative of crypto treasury still exists, but higher thresholds, stricter supervision, and bubble clearing will be carried out simultaneously. For investors, it is necessary to see the logic and arbitrage paths behind the financial structure clearly, and always be vigilant about the accumulation of risks behind the narrative—this "alchemy on the chain" cannot continue indefinitely, the winner takes all, and the losers exit.