Expert Warns: XRP and SOL Corporate Treasuries May Be a Scam

Statements regarding the establishment of crypto reserves worth hundreds of millions of dollars by small public companies are likely attempts to manipulate stock prices fraudulently, according to Matthew Sigel, head of digital assets at VanEck, as reported by The Block.

He noted, “There are numerous insider attempts at Pump & Dump. If the market capitalization is low and there are no new anchor investors, I suspect it’s a scam.”

Sigel raised concerns back in May after commenting on a Bloomberg report about Addentax Group’s plans to purchase approximately $800 million in Bitcoin and TRUMP meme tokens. He highlighted that the market value of the firm, which is listed in the U.S. but is entirely operated by Chinese interests, is merely $3 million.

In early June, Classover announced it was raising $500 million to establish a corporate treasury reserve in Solana. This initiative increased the total funds available for digital asset purchases through a stock issuance and convertible notes to $900 million, while the company’s capitalization barely reaches $63.5 million at the time of writing.

Singapore’s Trident Digital announced plans to secure $500 million for the “world’s first corporate treasury in XRP,” intending to raise funds through the issuance of stocks and other financial instruments. The market valuation of this Web3-focused company stands at $16.2 million.

Chinese firm Webus International outlined in a report to the SEC its plan to create a $300 million XRP reserve, with the company’s value at $60 million.

At one point, most of these companies managed to lift their stock prices significantly. The shift towards cryptocurrency strategy had the most noticeable impact on DeFi Development, which announced an agreement to sell $5 billion in stock to establish a fund in SOL.

“As we enter June, DeFi Dev Corp remains focused on executing our Solana treasury strategy,” the company stated.

Since March, the company’s market cap has increased from roughly $7 million to $379 million. RK Capital Management, which reports $500 million under management, is the partner for its securities issuance program.

Analysts at Coinbase Institutional identified the growing trend of corporate reserves, primarily in Bitcoin, as a systemic risk for the digital asset market.

This boom has been facilitated by changes in financial accounting rules in the U.S., allowing companies to report digital assets at fair market value.

A total of 234 firms collectively hold 820,542 BTC, with about 20 of them utilizing a capital-raising model through debt instruments first employed by Michael Saylor’s Strategy Microstrategy.

During market stress, these companies may face forced sales to meet obligations, potentially triggering panic among investors.

An analyst using the pseudonym Lowstrife compared this strategy to a financial pyramid that is destined to collapse.

Researchers at Standard Chartered reached similar conclusions, noting that imitators of Strategy may become a source of selling pressure in the future.

Economist and author of the book «The Bitcoin Standard,” Saifedean Ammous, warned that Bitcoin is nearing the peak of the current market. Historically, the subsequent decline in value could be as much as 80%, so he advised corporations investing in this asset to prepare for such a scenario.

It’s worth noting that Changpeng Zhao, founder of the largest cryptocurrency exchange, Binance, has also highlighted the risks associated with the widespread formation of corporate Bitcoin reserves.