Turmoil inside World Liberty-based crypto treasury includes investigations, firings and Rwandan money laundering conviction
ALT5 Sigma Corporation, the Nasdaq-listed fintech that morphed into a digital asset treasury (DAT) committed to accumulating World Liberty Financial tokens, has been dealing with significant internal turmoil alongside its stock's collapse, according to a new report from The Information published Wednesday.
The company's shares, ticker ALTS, are down about 80% since ALT5 Sigma pivoted to its DAT strategy in August, according to Yahoo Finance.
In the weeks after announcing it had adopted a strategy of accumulating WLFI tokens — the governance token of the DeFi project World Liberty, which is backed by President Donald Trump and his sons Donald Jr., Eric, and Barron — ALT5 Sigma reportedly "warned staff it would likely face litigation and regulatory investigations" as several senior executives either quit or were fired, according to The Information.
It's unclear at the moment what type of regulatory investigations, if any, may be looming.
In September, The Wall Street Journal reported that both the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority (FINRA) had contacted multiple DATs with questions about irregular patterns of trading volume and share price movements. While ALT5 Sigma is not being accused of any wrongdoing, there's some evidence of unusual trading activity in its shares before the official announcement of the WLFI strategy on Aug. 11.
ALT5 Sigma didn't immediately respond to a request for comment. A spokesperson for World Liberty told The Block: "As the USD1 ecosystem continues to grow, World Liberty Financial is excited about the future of our partnership with ALT5."
Both ALT5 Sigma's communications, both internal and public, have been somewhat irregular in recent months. The company ed its staff in September that the company's CEO had been suspended, apparently without publicly disclosing the suspension until October, the report also said.
In another twist, The Information reports that a Rwandan court found ALT5 Sigma criminally liable for money laundering earlier this year. The conviction was apparently not disclosed to the company's board "at the time of the World Liberty deal," according to Wednesday's report.
Overall, the story paints a picture of a company experiencing intense turmoil since opting for its digital asset treasury strategy. In August, seeking to capitalize on a DAT boom that has since begun to fizzle, ALT5 Sigma announced plans to raise a whopping $1.5 billion to pursue its WLFI token treasury strategy.
Expand Chart
Shareholder feels 'betrayed'
ALT5 Sigma said at the time of its crypto treasury launch that it would raise the money through a private placement of WLFI tokens contributed by World Liberty, in addition to capital from some of the "world’s largest institutional investors and prominent" crypto venture capital firms. ALT5 Sigma failed to name any potential investors.
The DAT trend in general is beginning to face criticism for allegedly providing an off-ramp for large token holders looking to exit their positions without selling directly into the market.
In Wednesday's story, one ALT5 Sigma investor explained his frustrations with what has become of the company. "I feel betrayed,” Los Angeles–based shareholder Matt Chipman said. “I hope it wasn’t just a money grab for the Trump family. This has been a nightmare scenario in the last three months."
Before becoming a WLFI treasury ALT5 Sigma described itself as a fintech providing blockchain-powered technology for tokenization, trading, clearing, settlement, payments, and safekeeping. The company was founded in 2018.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Credit panic hits AI trading: CoreWeave bond yields remain high, Nasdaq posts biggest weekly drop since late June
Concerns over the debt risk of AI infrastructure companies continue to rise. Yields on some CoreWeave bonds briefly exceeded 15% on Thursday and remained elevated on Friday. CoreWeave's stock price plunged another 12% on Friday, and the Nasdaq Composite Index fell about 4.5% for the week. Analysts point out that as capital costs rise to unbearable levels, companies will have no choice but to reduce their capital expenditures.
Philadelphia Semiconductor Index Experiences Longest Losing Streak Since 2008; Jensen Huang Responds Calmly: Short-term Fluctuations Won't Change AI's Long-term Growth Prospects
Despite recent sell-offs in AI-related stocks, Nvidia CEO Jensen Huang remains confident in the long-term prospects of the AI industry.
U.S. chip stocks drop for eight consecutive sessions! $2 trillion wiped out in market value, marking the longest losing streak since 2008
This week, the investment prospects of AI were questioned by the market. The Philadelphia Semiconductor Index fell by 11.4%, and the Nasdaq dropped more than 4% in a single week. CoreWeave's stock price fell over 25% during the week, and its bonds dropped to distressed levels, casting doubt on the high-yield debt financing model. Strategists warned that being overly bearish could lead to missing opportunities, while "Wood Sister" bucked the trend and increased her holdings of CoreWeave.
In August, overseas funds returned to the U.S. Treasury market; UK holdings surpassed $1 trillion for the first time; Japan and China continued to reduce holdings, with China’s U.S. Treasury holdings hitting the lowest level since 2008
According to a report by the U.S. Treasury Department, overseas investors made net purchases of $108.9 billion in U.S. Treasury bonds in August, reversing a two-month decline in holdings. Among the top ten countries and regions holding U.S. debt, only China and Japan reduced their holdings in August. Japan, the largest holder, saw its holdings drop for the fourth consecutive month, reaching a 22-month low in the same month it intervened in the foreign exchange market. China’s holdings declined for the third straight month, hitting new lows for two consecutive months not seen since 2008. The UK, the second-largest holder, posted historic highs for two consecutive months. Canada recorded the largest increase in August, up $38.3 billion, ranking fifth overall. Belgium had the second-largest increase, up $19.8 billion.
