Fintech company DeFi Technologies attributes stock plunge to market manipulation
Fintech company DeFi Technologies has raised concerns about potential market manipulation following the release of a report that caused its stock prices to plummet. The report, published earlier this week, claimed that DeFi Technologies’ stock price increases were solely due to marketing efforts. Following its publication, the company lost nearly 20% of its market value.
Details
DeFi Technologies announced that it has informed regulators in both the US and Canada about the potential manipulation of its shares. The report, published on June 18 by CoinSnacks.com—a site aimed at helping investors understand the crypto market—alleged that DeFi Technologies’ stock prices were rising only due to marketing campaigns and the involvement of influencers in the crypto industry, rather than business development.
DeFi Technologies dismissed the publication as «not worthy of attention, containing numerous defamatory, selective, inaccurate, incomplete, and misleading statements, assumptions, and insinuations.» The company suspects that the report was commissioned by short sellers looking to drive down its stock price.
On Tuesday, when the report was released, the fintech company’s stock dropped 28.9% in over-the-counter trading in New York to $1.6 per share. Investors sold over 1.4 million shares of the company—almost 66% more than the average daily volume. The sell-off on June 18 was the most significant in recent times, as the company’s stock had generally been rising. Excluding the June 18 drop, DeFi Technologies’ shares had increased by almost 2000% over the past 12 months.
What might be behind the report
DeFi Technologies revealed that shortly before the report’s publication, on June 10, a Canadian investment bank approached the company with a potential buy-sell deal worth $15 million from a hedge fund. The names of the bank and the hedge fund were not disclosed. The proposed amount was more than twice less than DeFi Technologies’ market capitalization, which Dow Jones data indicates is $37.2 million.
DeFi Technologies found the offer unusual, considering the bank had previously acted in the interests of short sellers. The company informed regulators about this offer and the potential market manipulation, according to its statement.
The company reminded that the US Securities and Exchange Commission (SEC) had previously exposed similar unethical practices. According to the SEC, investment and tax advisors Anson Funds Management and Anson Advisors did not disclose to clients that while describing short-selling strategies, they were actively working with authors of articles expressing bearish views on securities. They also did not mention that the fund under their management shared profits from short-selling trades with the article authors in exchange for early access to the articles.
What DeFi Technologies does
DeFi Technologies describes itself as a pioneer in bridging traditional capital markets with the world of decentralized finance (hence the name DeFi). One of its subsidiaries, Valour, issues exchange-traded products (ETPs) that provide retail and institutional investors with access to digital assets like Bitcoin through their traditional bank accounts. As of May 31, Valour managed assets worth CAD 837 million (about USD 610 million), nearly 65% more than the previous year.
Another division of DeFi Technologies is DeFi Alpha, which aims to identify low-risk arbitrage opportunities within the crypto ecosystem. Crypto arbitrage essentially involves profiting from price discrepancies for a digital asset across different markets or exchanges.
DeFi Technologies also engages in venture investments through DeFi Ventures and conducts research and infrastructure support through Reflexivity Research.
