What the DeFi Technologies Lawsuit Means for Crypto Companies

The recent federal class-action lawsuit against DeFi Technologies Inc. has raised alarms in the crypto industry, according to Jason Bishara, governance expert at NSI Insurance Group.

Investors are accusing the company of misleading them about the profitability of its proprietary DeFi Alpha arbitrage trading strategy.

With the market reacting quickly – sending stock prices tumbling – the question now is whether this legal challenge is just the tip of the iceberg. Bishara speaks out on the possibility of additional lawsuits against digital asset companies for undisclosed risks.

Earlier this month, DeFi Technologies Inc. was the subject of a federal securities class action lawsuit filed by investors who allege the company misled the market about the viability of its proprietary DeFi Alpha arbitrage trading strategy.

The lawsuit, covering the period from May 12, 2025 to November 14, 2025, alleges that the company misrepresented its financial health, particularly the sustainability of its revenue model, while executives, including CEO Olivier Roussy Newton and CFO Paul Bozoki, presented the strategy as a reliable source of profits. The strong corrective disclosures that followed led to a significant decline in the company’s stock price, damaging investors.

With increasing scrutiny of the digital asset space, this legal action could be just the beginning. As concerns over industry transparency grow, companies with large digital asset portfolios could soon face more lawsuits over undisclosed risks and unclear financial strategies.

We spoke to Bishara to get his take on the situation. He advises companies with large treasuries of digital assets and sees increasing focus on strategic claims, treasury disclosures and the potential for lawsuits.

Do you view the DeFi Technologies lawsuits as an isolated case, or could they signal a broader wave of litigation targeting companies with crypto or DeFi exposure?

Bichara: I don’t see the DeFi Technologies lawsuits as an isolated case – I see them as a trigger. This case has all the ingredients that invite copycat litigation: a volatile underlying asset class, a business model that can be difficult to explain (arbitrage/return), and a significant gap between what investors thought they were buying and what shows up in the numbers. The DeFi lawsuit is already framed around allegedly misleading statements and omissions related to its arbitrage strategy and competitive dynamics, and it follows a reported revenue decline and downward guidance that was accompanied by a sharp drop in stock price.

What makes companies vulnerable to these types of claims: lack of transparency, overestimated growth or unclear DeFi strategies?

Bichara: What makes companies vulnerable is the same pattern I see across the space: not cryptography itself, but the communication around it. If you overestimated performance, underestimated risk, or left your digital asset strategy vague enough that investors filled in the blanks for you, plaintiffs now see a road map. Lack of clarity is increasingly being treated as misrepresentation.

From a governance perspective, what best practices should companies with crypto or DeFi treasuries implement to mitigate legal risk?

Bichara: Boards need to tighten up the basics immediately. Document the strategy. Disclose how digital assets will be used. Make sure the direction is aligned with the message. These are simple governance steps, but they make the difference between being prepared and being caught off guard in litigation.

Are there common errors in public statements or investor communications about crypto that could increase exposure to lawsuits?

Bichara: The most common mistakes I see include: treating “cryptocurrency exposure” as a marketing line rather than an operational strategy; using broad language about “yield,” “arbitrage,” or “low-risk yield” without plain English explanation; and not updating the market when something significant changes – a major trade, a change in strategy or a withdrawal that changes the risk profile. If you hold cryptocurrencies on your balance sheet, you’re in the disclosure business whether you like it or not.

How should boards balance the need for transparency and the protection of competitive strategic information when discussing digital asset holdings?

Bichara: I think the right approach is “transparency at the strategy level and discretion at the trade level”. Investors don’t need your guide, but they do need to understand the why, the how and the risk. This means clearly describing: what assets you hold, the purpose (cash reserve or operational strategy), how you generate returns – if at all – what might force the sale and how governance works – monitoring, approvals, controls. You can protect competitive details (timelines, counterparties, exact execution mechanisms) while giving shareholders a truthful picture of exposure and decision-making.

Could these lawsuits set a precedent that would affect disclosure requirements or regulatory expectations for other companies holding digital assets?

Bichara: Yes, this can shape the expectations of other companies, even without a formal “new rule”. If the courts reward the plaintiffs here, it effectively raises the bar for forecasting discipline, risk communication, and board oversight of digital asset strategies – because everyone will be looking at what language got companies into trouble and what disclosures got attention. Investors are watching what the courts do when it comes to forecasting, reporting and governance – and that’s exactly why I expect more lawsuits.

And could we see an increase in businesses purchasing insurance or specialist coverage to protect against crypto-related litigation?

Bichara: On the financial side, I expect more companies to take protection seriously – starting with reviewing D&Os and considering whether existing coverage meaningfully contemplates crypto-related disclosure risk. I also wouldn’t be surprised to see more structured risk tools – insurance endorsements where available, hedging policies, liquidity buffers – but the biggest “hedge” is getting disclosure and governance right before the first complaint is filed.

For companies that have not disclosed their digital asset strategies, what proactive steps should they take to avoid legal action?

Bichara: If a company has not disclosed its strategy, it should immediately consider how it will communicate it to shareholders – because a lack of clarity is now treated as a misrepresentation. The proactive steps are simple:

• Create a significant events playbook: If you make a large transaction, explain what you are doing with the money and how it changes your risk profile.
• Put the strategy in writing (at board level), including objectives, limits, liquidity needs and buy/sell triggers.
• Align internal messaging so that earnings calls, presentations, press releases, and investor Q&As all describe the same reality.
• Disclose in plain language what the model is and what it is not, especially if you rely on arbitrage, lending, staking, or any other yield mechanism.

And how can companies quantify and communicate the risks of crypto or DeFi strategies to investors without causing legal problems?

Bichara: Don’t make it seem “safe”, don’t rely on hype, and don’t insinuate predictability where there is none. Communicate ranges, scenarios and decision rules, not promises. Explain what could go wrong (volatility, liquidity needs, counterparty risk, regulatory changes) and what governance exists to manage these risks. The goal is not to scare investors; this is to prevent them from saying later: “I would never have bought if I had understood the disadvantages”.

Do you anticipate this trend will result in the creation of industry standards or guidelines for digital asset treasury disclosure?

Bichara: Yes — I think this trend is pushing the market toward de facto standards, even before regulators formalize anything. Once you have a few high-profile cases, companies start to copy disclosure models that seem defensible, auditors and insurers start to ask more pointed questions, and investors start to expect consistent disclosures and narrative explanations in public DAT companies.

In other words, litigation pressure can standardize behaviors: clearer descriptions of strategy, clearer explanations of how returns are generated (or not), clearer governance, and clearer discussions about what triggers sales or strategy changes. If this lawsuit gains traction, other companies with digital asset treasuries will be next – and that’s how you’ll end up with an informal settlement pretty quickly.