A securities lawsuit involving DeFi Technologies (NASDAQ:DEFT) highlights growing regulatory scrutiny on corporate crypto treasury strategies, signaling risks for investors eyeing similar plays.
While many crypto firms have faced class actions, the difference with the DeFi Technologies case is apparent: it targets operational delays and disclosure risks within a corporate treasury.
Most previous crypto lawsuits have concentrated on more common issues, such as promoter liability, token sales or exchange collapses, which primarily hit platforms and promoters.
Specifically, the DeFi Technologies lawsuit alleges that the company hid delays in its core DeFi arbitrage trading, its main revenue driver, while downplaying competition from rival digital asset treasury firms (DATs).
The class action, which seeks to represent those who purchased or acquired DeFi Technologies shares between May 12 and November 14 of this year, comes after two recent share price drops for the company.
Amid emerging risks in the DeFi space, the governance expert emphasized the need for clear business strategies and disclosures to shareholders, and highlighted the role of independent third-party advisors to protect boards.
DeFi Technologies lawsuit breakdown
Plaintiffs claim that DeFi Technologies misled investors from May to November 2025 by issuing revenue guidance of US$218.6 million, despite arbitrage execution snags and rivals eroding its edge.
The company’s share price fell more than 7 percent on November 6 after it issued an update, then crashed over 27 percent between November 14 and 17. The second decline was triggered by the release of its Q3 results — the firm reported a 20 percent revenue miss, cut its 2025 guidance to US$116.6 million and shifted its CEO to an advisory role.
Unlike typical crypto suits over token sales or exchange collapses, this one targets a corporate treasury’s operational delays in DeFi yield strategies, exposing how arbitrage hiccups and DAT rivals demand precise disclosures.
“I think it’s an indicator that we’re going to see more questions and concerns surrounding the regulatory environment and disclosures, because we kind of hit into uncharted … territory very rapidly,” said Bishara.
The lawsuit arrives amid new fair-value accounting rules, testing board liability for strategy risks before 2026 filings.
Operational value vs. crypto laundering
An emerging concern for regulators and investors is the distinction between companies with genuine transactional components and those using public markets to create artificial liquidity.
Bishara noted that smaller companies divesting from core businesses to pivot toward crypto could become targets for regulatory scrutiny due to a perceived change in control.
From his perspective, firms primarily pursuing a treasury strategy could come under fire for potentially prioritizing short-term stock value and liquidation over the best interests of shareholders.
In these smaller transactions, Bishara suggested that the shift can be viewed as a way to convert illiquid digital assets into US dollars by selling stock in the open market.
“You’re converting something that I can’t really sell, and I can’t really buy a piece of pizza with … and turning it into something that I can buy a piece of pizza with,” the expert explained. “It’s almost like laundering crypto into currency,” he added, clarifying that this is not a one-size-fits-all accusation.
Consequently, he believes investors should look for companies whose underlying business models have operational potential, rather than those focused purely on digital asset transactions.
Board oversight and fiduciary duty
The rapid evolution of DeFi has fundamentally outpaced the regulatory frameworks designed to govern it.
For investors, the DeFi Technologies case underscores the danger of imprecise disclosures around crypto assets, particularly when firms pivot their strategies without clear communication to shareholders.
Bishara observed that as stock volatility triggers these types of lawsuits, corporate boards are being forced to rethink the practical applications of their fiduciary responsibility.
To fulfill their duty to shareholders, the expert argued that boards must engage in active, expert-led evaluation. Engaging independent third-party advisors, such as attorneys or investment bankers, to evaluate crypto treasury deals will insulate and help companies protect themselves in this uncharted territory.
From his perspective, this process effectively transfers some of the risk from board members to advisors.
Bishara further emphasized the importance of documenting the specific evaluation of a transaction in board minutes, noting that if a director disagrees with a crypto strategy, they should “disagree with it in the minutes” in order to ensure that their individual interests are protected.
The need for rigorous board oversight is being driven home by the insurance market. Bishara observed that even if a company’s actual risk profile has not changed, the cost of mitigating risk through Directors and Officers (D&O) insurance is skyrocketing as the number of carriers willing to underwrite these risks has shrunk significantly.
“I am quite certain that we are going to see policy language that specifically discusses or removes some of these potential pieces of liability, specifically in companies that are not insuring for these types of transactions,” Bishara predicted, adding that standard insurance companies will likely add no-crypto clauses to their policies.
“I would definitely expect that more, not from the crypto underwriters, but more from the non-crypto underwriters, to really make sure that they’re not winding up on a risk accidentally,’ he also noted.
For investors, Bishara suggested that a company’s inability to secure affordable D&O insurance should be viewed as a significant red flag regarding the health of its balance sheet.
Investor takeaway
Bishara’s front-row seat to operational crypto-utility and high-frequency transactional modeling has helped shape his view of where the market is headed in 2026 and beyond. While the DAT model dominated the 2024/2025 cycle, he believes the space is rapidly evolving into a new phase of business.
“I think it’s a great space for really exploring how the world is going to evolve and change,” he said.
For investors, the key to long-term value may lie in distinguishing between a company that is simply HODLing, and a firm that is building a transactional component.
Bishara pointed to emerging business models where firms are moving beyond treasury strategies to become operational, transactional companies that use crypto to power everyday transactions.
As the 2026 regulatory and insurance landscape tightens, focus will likely shift away from those chasing short-term stock premiums and toward those using DeFi to build sustainable, potentially undervalued business models.
Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
