The recent federal class action lawsuit against DeFi Technologies Inc. has raised alarms in the crypto industry, according to Jason Bishara, a governance expert at NSI Insurance Group.
Investors accuse the company of misleading them about the profitability of its proprietary DeFi Alpha arbitrage trading strategy.
With the market reacting swiftly—sending stock prices tumbling—the question now is whether this legal challenge is just the tip of the iceberg. Bishara weighs in on the potential for more lawsuits targeting digital asset companies over undisclosed risks.
Summary
- As DeFi Technologies faces a securities class action lawsuit for allegedly misrepresenting the financial health of its proprietary trading strategy.
- Risk expert Jason Bishara sheds light on the growing trend: ‘The DeFi Technologies lawsuit isn’t a one-off — it’s a trigger. This case has all the ingredients that invite copycat litigation.’
- The lawsuit, filed by Linkedto Partners LLC, alleges that DeFi Technologies’ executives misled investors by failing to disclose operational issues that severely impacted profits.
Earlier this month, DeFi Technologies Inc. was hit with a federal securities class action lawsuit filed by investors who allege that the company misled the market about the viability of its proprietary DeFi Alpha arbitrage trading strategy.
The lawsuit, covering the period from May 12, 2025, to November 14, 2025, alleges that the company misrepresented its financial health, particularly the sustainability of its revenue model, while executives, including CEO Olivier Roussy Newton and CFO Paul Bozoki, touted the strategy as a reliable source of profits. The sharp corrective disclosures that followed led to a significant drop in the company’s stock price, harming investors.
With growing scrutiny on the digital asset space, this legal action could be just the beginning. As concerns about industry transparency rise, companies with large digital-asset portfolios may soon face more lawsuits over undisclosed risks and unclear financial strategies.
We spoke with Bishara to get his take on the situation. He advises companies with significant digital-asset treasuries and is seeing an increasing focus on strategy claims, treasury disclosures, and the potential for legal action.
Do you see the DeFi Technologies lawsuits as a one-off, or could they signal a broader wave of litigation targeting companies with crypto or DeFi exposure?
Bishara: I don’t see the DeFi Technologies lawsuits as a one-off — I see them as a trigger. This case has all the ingredients that invite copycat litigation: a volatile underlying asset class, a business model that can be hard to explain (arbitrage/yield), and a big gap between what investors thought they were buying and what showed up in the numbers. The DeFi suit is already being framed around allegedly misleading statements and omissions tied to its arbitrage strategy and competitive dynamics, and it follows a reported revenue drop and lowered forecast that hit alongside a steep share-price decline.
What makes companies vulnerable to these kinds of claims—lack of transparency, overstated growth, or unclear DeFi strategies?
Bishara: What makes companies vulnerable is the same pattern I’m seeing across the space: not the crypto itself — the communication around it. If you overstated performance, understated risk, or left your digital-asset strategy vague enough that investors filled in the blanks for you, plaintiffs now see a roadmap. A lack of clarity is increasingly being treated as misrepresentation.
From a governance standpoint, what best practices should companies with crypto or DeFi treasuries implement to mitigate legal risk?
Bishara: Boards need to tighten the basics immediately. Document the strategy. Disclose how digital assets will be used. Make sure management is aligned on messaging. These are simple governance steps, but they’re the difference between being prepared and being caught flat-footed in litigation.
Are there common mistakes in public statements or investor communications about crypto that could increase exposure to lawsuits?
Bishara: The most common mistakes I see include: treating “crypto exposure” like a marketing line instead of an operating strategy; using broad language about “yield,” “arbitrage,” or “low-risk return” without plain-English explanation; and failing to update the market when something material changes — a major transaction, a shift in strategy, or a drawdown that alters the risk profile. If you hold crypto on your balance sheet, you’re in the disclosure business whether you like it or not.
How should boards balance the need for transparency with protecting competitive strategic information when discussing digital-asset holdings?
Bishara: I think the right approach is “strategy-level transparency, trade-level discretion.” Investors don’t need your playbook, but they do need to understand the why, the how, and the risk. That means clearly describing: what assets you hold, the purpose (treasury reserve vs. operating strategy), how you generate returns — if applicable — what could force selling, and how governance works — oversight, approvals, controls. You can protect competitive details — timing, counterparties, exact execution mechanics — while still giving shareholders a truthful picture of exposure and decision-making.
Could these lawsuits set a precedent that affects disclosure requirements or regulatory expectations for other companies holding digital assets?
Bishara: Yes, this can shape expectations for other companies, even without a formal “new rule.” If courts reward plaintiffs here, it effectively raises the bar on forecasting discipline, risk communication, and board oversight for digital-asset strategies — because everyone will be looking at what language got companies in trouble and what disclosures held up. Investors are watching to see what courts do on forecasting, communication, and governance — and that’s exactly why I expect more suits.
And might we see an increase in companies purchasing specialized insurance or hedges to protect against crypto-related litigation?
Bishara: On the financial side, I do expect more companies to take protection seriously — starting with reviewing D&O and considering whether existing coverage meaningfully contemplates crypto-related disclosure risk. I also wouldn’t be surprised to see more structured risk tools — insurance riders where available, hedging policies, liquidity buffers — but the bigger “hedge” is getting disclosure and governance right before the first complaint is filed.
For companies that haven’t disclosed their digital-asset strategies, what proactive steps should they take to avoid lawsuits?
Bishara: If a company hasn’t disclosed its strategy, it needs to immediately think about how it’s going to communicate that to shareholders — because a lack of clarity is now being treated as misrepresentation. The proactive steps are straightforward:
- Create a material-events playbook: if you make a large transaction, explain what you’re doing with the money and how it changes your risk profile.
- Put the strategy in writing (board-level), including objectives, limits, liquidity needs, and triggers for buying/selling.
- Align internal messaging so earnings calls, decks, press releases, and investor Q&A all describe the same reality.
- Disclose in plain language what the model is and isn’t — especially if you rely on arbitrage, lending, staking, or any yield mechanic.
And how can companies quantify and communicate the risks of crypto or DeFi strategies to investors without inviting legal trouble?
Bishara: Don’t make it sound “safe,” don’t lean on hype, and don’t imply predictability where there isn’t any. Communicate ranges, scenarios, and decision rules — not promises. Explain what could go wrong — volatility, liquidity needs, counterparty risk, regulatory shifts — and what governance exists to manage those risks. The goal isn’t to scare investors; it’s to prevent them from later saying, “I never would have bought if I’d understood the downside.”
Do you anticipate this trend driving the creation of industry standards or guidelines for digital-asset treasury disclosures?
Bishara: Yes — I think this trend pushes the market toward de facto standards, even before regulators formalize anything. Once you have a few high-profile cases, companies start copying the disclosure patterns that look defensible, auditors and insurers start asking more pointed questions, and investors begin expecting consistent line items and narrative explanations across “DAT-style” public companies.
In other words, litigation pressure can standardize behavior: clearer descriptions of strategy, clearer explanations of how returns are generated (or not), clearer governance, and clearer discussion of what triggers selling or strategy shifts. If this lawsuit gains traction, other companies with digital-asset treasuries are next — and that’s how you end up with an informal rulebook pretty quickly.
Source: https://crypto.news/defi-technologies-lawsuit-crypto-firms-jason-bishara/
