A securities lawsuit involving DeFi Technologies (NASDAQ:DEFT) highlights growing regulatory scrutiny of companies’ crypto treasury strategies, signaling risks for investors considering similar plays.
While many crypto companies have been the subject of class action lawsuits, the difference with the DeFi Technologies case is obvious: it targets operational delays and disclosure risks within a corporate treasury.
Most previous crypto lawsuits have focused 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 transactions, its primary revenue driver, while downplaying competition from rival digital asset treasury (DAT) companies.
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 declines in the company’s stock price.
Jason Bishara, head of financial practice at NSI Insurance, sees the DeFi Technologies case as an inflection point. In an interview with Investing News Network, he warned that imprecise disclosures about crypto holdings or return strategies presented litigation risks for companies as year-end filings approach, citing deals collapsing due to poor communication.
Amid emerging risks in the DeFi space, the governance expert highlighted the need for clear business strategies and shareholder disclosures, and highlighted the role of independent third-party advisors to protect boards.
Failed DeFi Technologies lawsuit
The plaintiffs claim that DeFi Technologies misled investors from May to November 2025 by issuing revenue forecasts of US$218.6 million, despite arbitrage execution issues and the erosion of its advantage by competitors.
The company’s stock price fell more than 7% on November 6 after releasing an update, then crashed more than 27% between November 14 and 17. The second decline was triggered by the release of its third-quarter results: the company reported a 20% revenue shortfall, cut its 2025 guidance to $116.6 million and moved its CEO to an advisory role.
Unlike typical crypto lawsuits over token sales or exchange collapses, this one targets a company’s treasury operational delays in DeFi yield strategies, revealing how arbitrage duds and DAT rivals demand precise disclosures.
“I think it’s an indicator that we’re going to see more questions and concerns around the regulatory environment and disclosures, because we’ve sort of entered uncharted territory very quickly,” Bishara said.
The lawsuit comes amid new fair value accounting rules, testing board accountability for strategic risks ahead of 2026 filings.
Operational Value vs. Cryptocurrency Laundering
An emerging concern for regulators and investors is the distinction between companies with true transactional components and those that use public markets to create artificial liquidity.
Bishara noted that small businesses that divest from their core businesses into crypto could become targets of regulatory scrutiny due to a perceived change in control.
In his view, companies pursuing primarily a cash flow strategy could be criticized for potentially prioritizing stock value and short-term liquidation over the best interests of shareholders.
In these smaller transactions, Bishara suggested that this change can be seen as a way to convert illiquid digital assets into US dollars by selling shares on the open market.
“You convert something that I can’t really sell, and I can’t really buy a piece of pizza… and you turn 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 unique accusation.
Therefore, he believes that investors should look for companies whose underlying business models have operational potential, rather than those focused solely 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 highlights the danger of inaccurate information about crypto assets, particularly when companies change their strategies without clear communication to shareholders.
Bishara observed that with stock volatility triggering these types of lawsuits, 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. Using independent third-party advisors, such as lawyers or investment bankers, to evaluate crypto treasury transactions will protect and help businesses protect themselves in this uncharted territory.
In his view, this process effectively transfers some of the risk from board members to advisors.
Bishara further emphasized the importance of documenting the specific assessment of a transaction in board minutes, noting that if a director disagrees with a crypto strategy, they should “disagree with it in the minutes” to ensure their individual interests are protected.
The need for rigorous board oversight is highlighted by the insurance market. Bishara observed that while a company’s actual risk profile has not changed, the cost of mitigating risks through directors and officers (D&O) insurance is skyrocketing as the number of insurers willing to underwrite these risks has declined significantly.
“I’m quite certain that we’re going to see policy language that specifically discusses or removes some of these potential liability elements, particularly in companies that don’t insure 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 crypto underwriters, but more from non-crypto underwriters, to really make sure that they don’t accidentally end up at risk,” he also noted.
For investors, Bishara suggested that a company’s inability to obtain affordable D&O insurance should be seen as an important red flag regarding the health of its balance sheet.
What investors should remember
Having Bishara at the forefront of operational crypto-utilities and high-frequency transactional modeling has helped shape his vision for where the market is headed in 2026 and beyond. While the DAT model has dominated the 2024/2025 cycle, it believes that the space is rapidly moving into a new phase of activity.
“I think it’s a great space to really explore how the world is going to evolve and change,” he said.
For investors, the key to long-term value may lie in the distinction between a company that simply HODLs and a company that builds a transactional component.
Bishara highlighted emerging business models in which companies are moving beyond treasury strategies to become operational and transactional companies that use crypto to conduct everyday transactions.
As the regulatory and insurance landscape of 2026 tightens, the focus will likely shift from those seeking short-term stock market premiums to those using DeFi to build sustainable and potentially undervalued business models.
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Securities Disclosure: I, Meagen Seatter, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Investing News Network does not guarantee the accuracy or completeness of the information reported in the interviews it conducts. The views expressed in these interviews do not reflect the opinions of Investing News Network and do not constitute investment advice. All readers are encouraged to do their due diligence.
