Bloomberg Chief Financial Writer: The underlying logic behind US listed companies' crazy buying of cryptocurrencies

Original article 《Sell Your Crypto on the Stock Exchange》, compiled by Odaily jk.

The original author, Matt Levine, is a Bloomberg Opinion columnist responsible for financial reporting, with consistently top readership among Bloomberg financial opinions. He was previously an editor at Dealbreaker, worked in the investment banking division of Goldman Sachs, served as a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and worked as an assistant judge at the US Third Circuit Court of Appeals.

Crypto Treasury Companies

Last Tuesday, SharpLink Gaming Inc. was still a company focused on online marketing for sports betting, with a stock price of around $2.91 per share and a market capitalization of only about $2 million. Although still listed on Nasdaq, it was on the brink of delisting. A few weeks ago, it had just undergone a reverse stock split to maintain a stock price above Nasdaq's $1 minimum requirement, and it had not met Nasdaq's basic requirement of at least $2.5 million in shareholder equity.

Accordingly, SharpLink announced a stock issuance that day, raising $4.5 million at $2.94 per share. The official statement was that these funds would be used to "restore compliance with Nasdaq's minimum shareholder equity requirements". However, the company also added: "We may use some of the funds to purchase cryptocurrencies in line with a treasury strategy we are considering."

Honestly, this is not surprising. Strictly speaking, SharpLink is a listed company, but by realistic standards, it is more like a "listed shell" - with a market value of $2 million and annual revenue of only a few million dollars, such a scale can hardly support the operational and compliance costs of a listed company. In the past, this was a problem.

But in 2025, this has become an opportunity. SharpLink possesses two highly sought-after but relatively scarce assets in the current market:

• It has a US listed company shell;

• And basically hasn't used this shell for much.

This makes it an ideal target for "transforming into a crypto treasury". As I've often said, the US stock market is willing to pay over $2 for $1 of crypto assets. This phenomenon has long been discovered by crypto entrepreneurs. If you have a large amount of Bitcoin, Ethereum, Solana, Dogecoin, or even TRUMP, the best approach is to put them into a US listed company and sell them to secondary market investors at a higher price.

MicroStrategy is indeed a large listed company with a mature investor relations team, having effective marketing strategies for retail investors, holding a significant amount of Bitcoin, and enjoying natural advantages such as first-mover status, diversified financing channels, and inclusion in leveraged ETFs and some indices. If some investors (such as mutual fund managers or some retail investors) want Bitcoin exposure but cannot directly buy coins or ETFs, MicroStrategy might indeed deserve a certain valuation premium.

However, the problem is that now a bunch of "mini MicroStrategy" copycats are also being crazy overvalued by the market. The market's preference for these "new crypto treasury companies" seems endless. I completely cannot explain this phenomenon.

A month ago, I wrote a sentence: "Now the situation is like the crypto circle is constantly playing the US stock market, and the US stock market is repeatedly falling for it." Looking at it now, this feeling is even stronger.

Second Point: Are People Still Doing This?

This is not actually surprising: I wrote last month that "if you run a crypto investment fund and haven't acquired a business with stalled or thin operations to play this arbitrage game, that would be poor management."

For all companies related to the crypto field, the current lowest capital cost globally is to acquire a listed company and transform it into a crypto treasury model. Therefore, we have already seen players like Tether, SoftBank, Bitfinex, Nakamoto Holdings joining the battle. The Financial Times even reported that Trump Media & Technology Group is going to play - which is not surprising, honestly, it would be strange if they did not join.

However, because of this, most listed companies participating in this game (except MicroStrategy) are almost small, half-abandoned companies. Companies like Apple, which truly have real industries, cash flow, and business, of course would not get involved in this "method of causing stock price to surge through a strange operation".

For some crypto entrepreneurs, the situation might be similar. We have reason to believe that Ethereum founder Vitalik Buterin is more concerned with how to optimize the Ethereum protocol, rather than thinking about how to package ETH at a high price to sell to stock investors. But for many people, such valuation premium is just too tempting to resist.

Moreover, Mango also allows users to use their position's floating profits as collateral for crypto lending. For example, if you earn $100 in a contract trade, the platform might let you pledge this floating profit and borrow $50 in cryptocurrency - and it's a non-recourse loan, which means if you can't repay, you have no obligation to do so.

Eisenberg's operation was as follows:

1. He bought millions of dollars worth of MNGO perpetual contract long positions on Mango Markets;

2. Simultaneously, he opened an equal short position, making his net position flat;

3. Then, he went to the "reference exchanges" corresponding to these contracts and bought a large amount of MNGO spot;

4. Due to MNGO's low liquidity, his buy orders significantly pushed up MNGO's market price;

5. This caused his long contract position on Mango to rapidly increase in value;

6. He immediately used the "book floating profit" of these long positions as collateral to borrow a large amount of cryptocurrency and withdraw;

7. Then, he sold MNGO on the reference exchanges, driving down the spot price;

8. This made his short contract position more valuable;

9. He again used the floating profit of these short positions as collateral to borrow cryptocurrency from Mango.

Ultimately, according to official disclosure, Eisenberg borrowed and quickly withdrew over $100 million in crypto assets from Mango Markets.

The government argues that when Eisenberg borrowed, he implicitly conveyed two points to Mango Markets:

First, the value of collateral in his account was not manipulated;

Second, these collaterals are indeed valuable.

In the government's view, both of these points are false statements.

However, this logic conflicts with the ruling of the United States Court of Appeals for the Second Circuit in the United States v. Connolly case.

In the Connolly case, Deutsche Bank (DB) reported its "DB interbank lending rate" daily to the British Bankers' Association (BBA). The defendants—DB traders—would sometimes request LIBOR quotation personnel to submit quotes favorable to their positions. Court evidence showed that other DB employees and LIBOR quotation personnel themselves admitted that adjusting LIBOR quotes for traders' interests was "not right" at the time.

But the court did not buy it. The court rejected the government's argument that these quotes implicitly equate to "confirming that the quotes were not interfered with by traders".

Even though market participants generally believed that trader interference with LIBOR quotes was improper, the absence of explicit prohibitions or guidelines at the time was decisive. The court noted that although BBA later indeed issued relevant prohibitive rules (just as Mango Markets updated its protocol after Eisenberg's operation), "no such rules or prohibitions existed in the early stages of this case".

We discussed the Connolly case in 2022: LIBOR itself was a "made-up" number, so DB traders were unlikely to commit a crime for "getting this number wrong". Now we can see a similar logical analogy with the MNGO token price.

In summary, what needs to be emphasized is that at least in terms of wire fraud, the platform's terms and conditions are indeed crucial. If Mango Markets had explicitly told users: "If you want to use a position as collateral for borrowing, you must promise that you have not conducted any market manipulation", then Eisenberg's trade would constitute fraud. But it did not say this, and said nothing at all, so his actions do not constitute fraud.

There is another typical creed in the crypto circle: "Code is Law" - if a crypto system allows you to do something, you have the right to do it, even if the development team did not fully anticipate the consequences when setting parameters. Under this concept, traditional legal norms, contextual conventions, or user agreements are unimportant; the only thing that matters is what code is written in the system.

However, the ruling of this case is not entirely about this. Its actual meaning is: code can become law. If you operate a crypto platform and tell users "please do not manipulate, attack, or engage in destructive behaviors", then when someone actually manipulates, they might get into trouble. But if you operate a platform without saying any of these things, just saying "this is how the platform runs, figure it out yourself", then even if someone finds a system loophole and manipulates it, it is legal, or at least, does not constitute wire fraud.

This actually makes sense. I wrote in an article discussing Eisenberg's operation: "You can imagine two different market systems and let users choose to join one of them": one called "Nice Market", with clear rules prohibiting manipulation and insider trading; the other called "Fun Market", where as long as you find a way to profit, it's considered skill, with completely open gameplay. I also suggested that given the relatively weak connection between crypto systems and real-world financial systems (though this is changing), it might become a testing ground for "Fun Market", provided participation is entirely voluntary. This might be the "actual rule" conveyed by this case.

However, all this doesn't help Eisenberg much. As Bloomberg pointed out, when he was arrested for this crypto case, US law enforcement discovered he had downloaded 1,274 child pornography images and videos between 2017 and 2022, and he was sentenced to about four years in prison in May this year for possessing child pornographic content.

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