Original article "Sell Your Crypto on the Stock Exchange" compiled by Odaily Planet Daily jk.
Original author: Matt Levine is a Bloomberg Opinion columnist responsible for financial reporting, consistently ranking first in readership among Bloomberg's financial opinions. He was an editor at Dealbreaker, worked in the investment banking division at Goldman Sachs, served as a mergers and acquisitions lawyer at Wachtell, Lipton, Rosen & Katz, and was a law clerk for a judge on the U.S. Court of Appeals for the Third Circuit.
Crypto Treasury Companies
Last Tuesday, SharpLink Gaming Inc., a company focused on online marketing for lottery games, had a stock price of about $2.91 per share, with a market capitalization of only about $2 million. Although it is still listed on NASDAQ, it is actually on the brink of collapse. A few weeks ago, it had just conducted a reverse stock split to maintain a stock price above the NASDAQ's minimum requirement of $1, while it also failed to meet NASDAQ's basic requirement of at least $2.5 million in shareholder equity.
As a result, SharpLink announced a round of stock issuance that day to raise $4.5 million at a price of $2.94 per share. The official statement was that the funds would be used to "restore compliance with NASDAQ's minimum shareholder equity requirements." However, the company also added, "We may use part of the funds to purchase cryptocurrency to align with a treasury management strategy we are considering."
To be honest, this is not surprising. SharpLink is technically a public company, but by real-world standards, it resembles more of a "shell company"—with a market cap of $2 million and annual revenue of only a few million dollars, such a scale struggles to support the operational and compliance costs of being a public company. In the past, this was a problem.
But in 2025, this has become an opportunity. SharpLink possesses two highly sought-after yet relatively scarce assets in the current market:
It has a shell of a U.S. public company;
And it has basically done nothing with this shell.
This makes it an ideal candidate for "transforming into a crypto treasury." As I have often said, the U.S. stock market is willing to pay more than $2 for a $1 crypto asset. This phenomenon has long been recognized by entrepreneurs in the crypto space. If you have a large amount of Bitcoin, Ethereum, Solana, Dogecoin, or even TRUMP, the best way to leverage them is to put them into a U.S. public company and then sell them at a higher price to secondary market investors.
But to do this, you first need a public company. Such shell resources are not abundant, as most quality companies are already quite busy. If you called Apple Inc. and said, "We want to merge our Dogecoin with you to make it more valuable," Apple would surely reject you.
The real opportunity lies with those marginal public companies: they are still listed, but barely hanging on. The phones of these companies are being bombarded with calls every day.
Thus, we saw the following press release:
SharpLink Gaming announced a $425 million private placement, officially launching its Ethereum treasury strategy…
SharpLink continues to operate as a company focused on providing performance-driven online marketing services for the U.S. lottery industry.
According to the announcement:
After the private placement is completed, SharpLink will officially launch its Ethereum Treasury Strategy;
Joseph Lubin, founder and CEO of Consensys and co-founder of Ethereum, will serve as the chairman of SharpLink's board of directors after the private placement transaction is completed;
The investors in this round of private financing include several well-known crypto venture capital and infrastructure companies, such as ParaFi Capital, Electric Capital, Pantera Capital, Arrington Capital, Galaxy Digital, Ondo, White Star Capital, GSR, Hivemind Capital, Hypersphere, Primitive Ventures, and Republic Digital.
In other words, Consensys, a blockchain software company led by Ethereum co-founder Joseph Lubin, aims to operate a $425 million Ethereum asset pool, while the capital market values this asset far above its actual worth. SharpLink happens to be the ideal "shell resource" to achieve this goal. Thus, Consensys and its co-investors will invest $425 million to purchase SharpLink's stock at a price of $6.15 per share, while SharpLink will use these funds to buy Ethereum (ETH).
At the market open today, SharpLink's stock price was $33.93, and by 1:30 PM, the trading price was about $35, giving the company a market capitalization of $2.5 billion. In other words, this $425 million Ethereum asset has received a $2.5 billion valuation in the U.S. stock market.
It is important to note that SharpLink currently does not hold any Ethereum. The investors are providing dollars, not Ethereum. This is not "we already have a lot of ETH, so let's go public," but rather "since the U.S. stock market is willing to buy $1 of ETH for $2 or even $6, we should definitely take advantage of this arbitrage opportunity."
From a certain perspective, this is almost a public arbitrage opportunity. Theoretically, anyone with hundreds of millions of dollars in cash can buy cryptocurrency in the market and then put it into a public company shell, and the U.S. stock market will immediately provide over 5 times the book profit. What you really need, aside from startup capital, is to find a small public company that can "hold the coins."
Remember that little snack shop in New Jersey? It once had a fully diluted market cap of $2 billion. It just came a bit too early. In fact, this snack shop (or the shell company behind it) existed for a similar "trading model": a listed shell company paired with a transitional small business (like running a snack shop), with the real purpose of completing a reverse merger with some private company—most likely a foreign enterprise—to go public. As for why the people behind the snack shop manipulated the stock price and are now going to jail, I have never fully understood, but it is actually unrelated to this trading logic itself. The core of this play is to find a suitable merger target.
That snack shop unfortunately got shut down before the "crypto treasury company" model really took off, but my goodness, if it could have held on until today, it would have been an astonishing deal. Imagine if that New Jersey snack shop could merge with a $425 million Ethereum asset pool; its $2 billion market cap back then would actually make sense. Now, it only takes a few hundred million dollars in cryptocurrency, plus a micro public company, to combine and achieve a valuation of billions in the capital market.
Back to SharpLink: last Thursday, its stock price rose by 35%, and on Friday, it rose another 79%, while the related transaction was only officially announced today. I suspect there may have been information leaks or insider trading, but I wouldn't jump to that conclusion easily. After all, SharpLink has long publicly stated that it is considering a crypto treasury strategy, and it is itself an ideal "candidate shell" company (publicly listed but with little business). Even without insider information, it is entirely reasonable to speculate: "This small company is likely to announce something crypto-related soon, and its stock price might skyrocket by hundreds of points, so I might as well buy a little." Of course, this is not investment advice, and my use of "reasonable" is not in the traditional sense of "rational."
The entire event is quite absurd, but I want to highlight three particularly absurd things.
First: Is this trick still working?
I have written a lot about "crypto treasury companies" in the past few months—MicroStrategy Inc. is basically the pioneer of this play and has been doing it for many years. Recently, this model has suddenly exploded. Intuitively, it shouldn't all be successful.
After all, MicroStrategy is a large public company with a mature investor relations team, effective promotional strategies for retail investors, and indeed holds a large amount of Bitcoin, along with first-mover advantages, diversified financing channels, and natural advantages like being included in leveraged ETFs and some indices. If some investors (like mutual fund managers or certain retail investors) want exposure to Bitcoin but cannot directly buy coins or ETFs, then MicroStrategy might indeed deserve a certain valuation premium.
But the problem is, now there are a bunch of "small MicroStrategies" following suit that are being treated with crazy premiums by the market. The market's affection for these "new crypto treasury companies" seems endless. I cannot explain this phenomenon at all.
A month ago, I wrote a line: "The current situation feels like the crypto space is continuously playing the U.S. stock market, and the U.S. stock market keeps falling for it." Now, this feeling is even stronger.
Second: Are people still doing this?
This is actually not so surprising: I wrote last month that "if you run a crypto investment fund and haven't acquired a dormant or thinly traded U.S. public company to play this arbitrage, that would be a serious mismanagement."
For all companies related to the crypto space, the lowest global capital cost right now is to acquire a public company and transform it into a crypto treasury model. Therefore, we have seen players like Tether, SoftBank, Bitfinex, and Nakamoto Holdings joining the fray. The Financial Times even reported that Trump Media & Technology Group is also getting in on the action—this is not surprising; to be honest, it would be strange if it didn't join.
However, it is precisely for this reason that most of the public companies participating in this game (aside from MicroStrategy) are almost all small, semi-abandoned companies. Companies like Apple, which have real businesses, cash flow, and operations, certainly would not get involved in this "strange operation to inflate stock prices."
For some entrepreneurs in the crypto space, the situation may be similar. We have reason to believe that Ethereum founder Vitalik Buterin is more concerned with optimizing the Ethereum protocol than with figuring out how to package and sell ETH at a high price to stock investors. But for many, the valuation premium is simply too tempting to resist.
Third Point: How to Cash Out?
This morning, SharpLink "created" $2 billion in paper profits out of thin air. So what happens next?
Theoretically, this profit is generated by the investors participating in the private placement (such as Consensys and its co-investors). But the problem is, they likely cannot cash out immediately: such private placement transactions usually have a lockup period, and their shares need to be formally registered before they can be sold. Moreover, they collectively hold 97% of SharpLink's shares, and if they sell all of them, the stock price will surely crash.
For an entire year before the announcement of the transaction, SharpLink's average daily trading volume was only about 75,000 shares. Based on today's circulation, it would take over three years to sell all the shares they hold.
Although the stock market currently values the $425 million worth of ETH they bought at $2.5 billion, they cannot "take out" this $2.5 billion. This paper profit is locked within the stock market valuation and cannot be extracted.
However, this is indeed a question worth studying. Modern finance seems to have found a way to consistently create billions of dollars in market value with minimal effort. While it’s not to say "anyone can do it in an hour," it is clear that many have discovered that the barriers to entry are not high.
The only issue is that if you cannot convert paper value into real cash, then it ultimately remains just a "showy trick." Nominally, you have become a billionaire because you hold 97% of SharpLink Gaming's shares, but don't forget, just a week ago, this company was valued at only $2 million, and you would also worry about how long this bubble can last.
You would certainly want to "cash out" a portion, but directly selling in the market does not seem like a viable path.
Of course, there are some "boring but realistic" answers: for example—"They now own a company valued at several billion dollars with extremely low capital costs; they can continuously issue new shares to the public to buy more Ethereum, thereby expanding their 'empire' and influence; when you control a company of such scale, you can pay yourself a high salary."
That sounds fine, but the problem is: these people originally had hundreds of millions of dollars in funds; they are not doing this to find a good job.
The real question is—how can they cash out that $2 billion?
I don't have a particularly good answer—if I did, I would probably be doing it myself. However, I want to point out that this question is very "crypto-like": it was originally a typical dilemma in the crypto industry, now brought into the stock market by a new generation of "crypto treasury companies."
This is a classic wealth story template in the crypto space:
You create some "magic beans"—like a new token—and then you hold most of them;
There are not many beans actually traded in the market, but the transaction price is high, so the entire project's market cap looks very large;
On the surface, you have become a billionaire, but once you actually try to sell these beans, the market will crash, and you will get nothing;
Having "paper wealth" does bring some benefits, such as prestige, resources, and a sense of superiority, but you also know in your heart that this "magic bean market" may not last long, so you are particularly eager to cash out.
The most famous case of this problem is probably the collapse of FTX:
The FTX exchange and Alameda Research investment firm, controlled by Sam Bankman-Fried (SBF), appeared to be worth hundreds of billions of dollars on paper, but a large part of this valuation was supported by the crypto assets they created themselves. In November 2022, as the market lost confidence in FTX, these tokens quickly went to zero, and the company's valuation evaporated.
At that time, I wrote an article and quoted a conversation I had with SBF on my podcast. He mentioned a crypto token and the "box" model built around it (Box Token):
"If everyone thinks that the market cap of this Box Token is around $1 billion, then it basically has that valuation. Everyone will account for it at this market cap. In fact, you can even use it for financing: pledge this token in a lending protocol to exchange for dollars. If you think its real value might not exceed two-thirds, you can also pledge part of it to take out money without ever paying it back—ultimately, it just gets liquidated. In a sense, this is already something that can be monetized."
In the crypto space, if you have a bunch of "magic beans" with a market valuation of $1 billion, there might really be someone willing to lend you $500 million in "real cash," and these loans might even be non-recourse.
But in the stock market… even if you control a crypto treasury company whose market cap has increased by 100,000% and you hold 97% of the shares, it is very difficult to finance 50% or even 10% based on its book value.
But seriously, I would give it a try.
Applying Game Theory: Someone Really Cashed Out Successfully, and…
In the crypto world, there is also a well-known case of someone successfully "monetizing" a batch of "magic beans."
In October 2022, a trader who called himself an "Applied Game Theorist," Avi Eisenberg, applied game theory to a decentralized crypto perpetual contract exchange called Mango Markets and successfully executed a highly controversial arbitrage operation.
Mango Markets offers perpetual contract trading for various crypto assets, including futures for its own token MNGO. The contract prices are settled through price oracles from several other crypto exchanges: your profit and loss on Mango depends on the price fluctuations of the corresponding spot assets on these external platforms.
Additionally, Mango allows users to use their unrealized gains as collateral for crypto lending. For example, if you made $100 in a contract trade, the platform might allow you to pledge that unrealized gain to borrow $50 worth of cryptocurrency—and it is a non-recourse loan, meaning that if you cannot repay it, you have no obligation to pay it back.
Eisenberg's operation was as follows:
He bought several million dollars' worth of long positions in MNGO perpetual contracts on Mango Markets;
At the same time, he opened an equal amount of short positions, making his net position zero (flat);
Then, he went to the corresponding "reference exchanges" and bought a large amount of MNGO spot;
Due to the low liquidity of MNGO, his buying significantly pushed up the market price of MNGO;
This caused the value of his long contract positions on Mango to rise rapidly;
He then used the "paper gains" from these long positions as collateral to borrow a large amount of cryptocurrency from Mango and withdrew it;
Then, he sold MNGO on the reference exchanges, driving down the spot price;
As a result, his short contract positions became more valuable;
He again used the unrealized gains from these short positions as collateral to borrow more cryptocurrency from Mango.
Ultimately, according to official disclosures, Eisenberg borrowed and quickly withdrew over $100 million in crypto assets from Mango Markets.
In simple terms, it was almost as if Eisenberg "stole" $100 million from Mango Markets. He manipulated the price of MNGO, artificially inflated the value of his contract positions, and then used these inflated values as collateral to borrow a large amount of funds. Since these loans were non-recourse—this is almost a standard practice in decentralized finance platforms—he had no obligation to repay them.
Of course, he was eventually arrested.
We have discussed this case several times before, including:
When he had just completed the transaction;
He subsequently posted a "Statement on Recent Events" on Twitter, explaining that he did indeed do this, but there was no problem because "all our actions were legal operations conducted in the open market, according to the protocol design, even though the protocol development team may not have fully anticipated the consequences of setting these parameters";
And when he was arrested, U.S. federal prosecutors clearly disagreed with his explanation.
Eisenberg was ultimately found guilty by a jury last April. But last Friday, the judge overturned the conviction.
According to Bloomberg:
U.S. District Judge Arun Subramanian last Friday overturned the conviction of Avraham Eisenberg on charges of fraud and market manipulation, while declaring him not guilty on a third charge. The judge found that the evidence presented during the trial was insufficient to support the jury's finding that Eisenberg had made false statements to Mango Markets. And Mango Markets is a decentralized finance platform driven by smart contracts.
(This is the source of the original judgment opinion.)
This case exposes two key issues:
First, jurisdictional issues: Eisenberg was prosecuted in New York, but his so-called "applied game theory operation" took place in Puerto Rico, targeting some technically "borderless" crypto trading platforms.
The three reference exchanges he used to manipulate the MNGO price are:
FTX, headquartered in the Bahamas;
AscendEX, headquartered in Romania;
Serum, a decentralized exchange that may not even have a headquarters.
And the Mango Markets platform itself has no evidence showing a direct connection to New York.
There has long been a consensus that "if you commit a financial crime, it is likely to be linked to New York," so federal prosecutors in New York can almost reach globally. But this case indicates that cryptocurrency is approaching the limits of such judicial boundaries.
In the crypto space, there is a stereotype belief: as long as you put things on the chain, you can evade the jurisdiction of various countries' laws. But the reality is not that simple.
For example, in Eisenberg's case: although he was convicted in New York, theoretically he could also be prosecuted in Puerto Rico or even Romania. However, putting things on the blockchain could indeed allow you to escape the judicial reach of the U.S. Attorney's Office for the Southern District of New York (SDNY). In the crypto space, this is considered quite a clever "operation."
In any case, this is the first key issue in this case: the reason Eisenberg's "commodity manipulation" charge was overturned is that the prosecution chose the wrong venue. The U.S. Department of Justice could consider re-filing these charges in Puerto Rico if it wishes.
But aside from commodity manipulation, he was also convicted of wire fraud—this charge was also completely dismissed by the judge, and the prosecution has no authority to re-prosecute.
The second core issue involved is: while Eisenberg's actions constituted market manipulation, whether they constituted "fraud" is actually unclear.
According to U.S. commodity law (which applies to crypto tokens including MNGO), as long as you use "any manipulative means" in derivative trading, you can be charged with commodity manipulation, which is why Eisenberg was prosecuted. However, "wire fraud" is stricter; it requires the perpetrator to make false statements through a computer or communication system to obtain monetary benefits.
The court ruling stated:
"To establish fraud, it must be proven that there was a material misrepresentation." The judge's conclusion was: no matter what Eisenberg did, he did not lie to anyone.
The government argued during the trial that Eisenberg's "fraud" was primarily reflected in two aspects (quoted from the judgment, with citations omitted):
He made Mango Markets believe he was applying for a legitimate cryptocurrency loan when he was actually trying to steal funds;
He inflated the value of his collateral, leading the platform to believe it was valuable, when in fact this value was artificially inflated and had no real support.
But none of these constitute lying.
Clicking the "borrow" button with no intention of repaying the loan may seem like fraud at first glance, but in the context of a crypto platform offering non-recourse loans, it does not hold.
Under the operational mechanism of such platforms, borrowers have no personal repayment obligation: the platform can only recover through collateral. If the collateral value falls below the loan amount, it is common practice to simply abandon the position. As the judge stated:
"What happens if a user borrows funds but the value of their collateral plummets? The system will liquidate it. There is no evidence that the 'borrow' function on Mango Markets implies that users have an obligation to repay—even no other obligation—despite the fact that this term may have such implications in a traditional context."
So, in other contexts, if someone deliberately conceals or distorts important information related to the terms or negotiations of a loan agreement when signing it, it may be considered fraud. But here, there were neither terms nor a negotiation process. There was only one word: "borrow."
Or to quote SBF: "You never have to pay back; you just get liquidated."
As for "inflating the value of collateral," Eisenberg actually did not do this: Mango Markets calculated the value of his collateral based on market prices (which he manipulated).
Interestingly, this does not constitute fraud, as there was an earlier case regarding LIBOR manipulation that provided precedent support:
Of course, Eisenberg was well aware that the value of his portfolio was derived from market manipulation and knew that this valuation would not last long. So, while the portfolio valuation at the time of collateralized borrowing may technically have been "accurate" (calculated based on the market price at that moment), the government believed his statements about the collateral value were misleading…
The government argued that when Eisenberg borrowed, he implicitly expressed two points to Mango Markets:
First, the value of the collateral in his account had not been manipulated;
Second, this collateral was indeed valuable.
And these two points, in the government's view, were false statements.
However, this logic conflicts with the ruling of the U.S. Court of Appeals for the Second Circuit in United States v. Connolly.
In the Connolly case, Deutsche Bank (DB) reported daily to the British Bankers' Association (BBA) the "borrowing rates of DB in the interbank market."
The defendants—namely, DB's traders—sometimes requested LIBOR submitters to provide quotes favorable to their positions. Evidence presented in court showed that other DB employees and LIBOR submitters themselves admitted that "adjusting LIBOR quotes for the benefit of traders was considered 'wrong' at the time."
But the court did not buy it. The court rejected the government's assertion—that these quotes implicitly equated to "confirming that the quotes were not influenced by traders."
Even if market participants generally believed that traders' interference with LIBOR quotes was improper, the absence of explicit prohibitions or guidelines at the time was decisive. The court pointed out that although the BBA later did implement relevant prohibitory rules (just as Mango Markets updated its agreements after Eisenberg's operation), "there were no such rules or prohibitions in place during the early stages of this case."
We discussed the Connolly case in 2022 as well: LIBOR itself is a number that is "pulled out of thin air," so it is unlikely that Deutsche Bank's traders could be criminally liable for "misreporting this number." It is now evident that this has a similar logical analogy to the price of the MNGO token.
In summary, it is important to emphasize that at least in terms of wire fraud, the platform's terms and conditions are indeed key. If Mango Markets had explicitly told users: "If you want to borrow against your position, you must promise that you have not engaged in any market manipulation," then Eisenberg's transaction would constitute fraud. But it did not say this, nor did it say anything at all, so his actions do not constitute fraud.
Another typical creed in the crypto space is: "Code is law": as long as 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 philosophy, traditional legal norms, contextual agreements, or user agreements are unimportant; the only thing that matters is what code is written in the system.
However, the ruling in this case does not entirely mean that. Its actual implication is: code can become law. If you operate a crypto platform and tell users "please do not engage in manipulation, attacks, or other destructive behaviors," then when someone actually manipulates, they may get into trouble. But if you operate a platform that says none of these things, only stating "this is how the platform operates, you figure it out," then even if someone finds a loophole in the system and manipulates, that is legal, or at least does not constitute wire fraud.
This actually makes sense. I once 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 can find a way to profit, it counts as skill, and the gameplay is completely open. I also suggested that, given the relative lack of real-world financial system connections in crypto systems (although this situation is changing), it could serve as a testing ground for the "Fun Market," provided participation is entirely voluntary. This may be the slight "practical rule" conveyed by this case.
However, all of this does not help Eisenberg much. As Bloomberg pointed out, when he was arrested for this crypto case, U.S. law enforcement discovered that he had downloaded 1,274 images and videos of child pornography between 2017 and 2022, and he was sentenced to about four years in May of this year for possession of child pornography.
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