Listen, we’re not saying that crypto and fraud go together like peanut butter and jelly. But wherever crypto goes, a waft of graft seems to follow in its wake.
The industry’s latest money-making scheme is crypto treasury companies: small, often unprofitable publicly traded companies that drop what they’re doing and buy as much cryptocurrency as they can handle. It inevitably juices the company’s share price, which inevitably encourages others to join in: Over 160 bitcoin treasury companies have cropped up across the market as of the end of August, according to the Financial Times, with more turning to alternative cryptocurrencies lately.
But it’s not all fun and games: Fortune noticed that several stocks that pivoted into crypto treasury companies enjoyed a big share price pop before announcing their new business model. The implication is that investors with insider knowledge bought shares before the rest of the market realized what was coming, likely during the company’s roadshow touting its transformation.
Just as companies won’t stop turning to crypto to boost shares, investors won’t stop betting on crypto treasury companies anytime soon. But as these companies continue to flood the market, investors need to know that not only are they exposing themselves to the perils of another crypto winter, they’re also often the victims of insider trading.—MR
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