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MicroStrategy Corporation, a Virginia-based business intelligence company, announced in a filing with the SEC on September 11, 2020, that it had adopted a new corporate treasury policy. The new policy shifts substantial cash holdings into bitcoin, "with bitcoin serving as the primary treasury reserve asset on an ongoing basis, subject to market conditions and anticipated needs of the business for Cash Assets, including future potential share repurchase activity." 

MicroStrategy now holds approximately $425 million in bitcoin, with possible future purchases. This is the first time a publicly traded company has transformed its corporate treasury holdings in what amounts to a strategy of "betting the company" on bitcoin.

LEGAL TOKENS

After MicroStrategy's announcement of its new corporate strategy shifting assets into bitcoin, its stock price rose almost 10%, which may indicate that investors bought the stock to get exposure to bitcoin. Could the SEC come calling, asking MicroStrategy to justify why it should not be deemed an investment fund rather than an operating company? 

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Author's Assets

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Anthony Tu-Sekine | Partner

As the head of Seward & Kissel’s Blockchain and Cryptocurrency Group and a frequent commentator on all things crypto, Anthony advises clients on a wide range of evolving topics, including how to structure and issue security and utility tokens, registered and unregistered offerings of security tokens, token custody, transfer and liquidity issues, non-security opinions, and investments in crypto assets by funds and other investors. A recognized leader on physical precious metals funds, Anthony represented APMEX Inc. and alternative asset manager Sprott Inc. in connection with the launch of OneGold.com, which allows investors to own gold documented on blockchain. He also:

  • Represents ShelterZoom, a leading blockchain-based SaaS contract management platform;

  • Helped form a tokenized hedge fund;

  • Provides advice in connection with ransomware payments made in cryptocurrencies; and

  • Worked with sponsors of bitcoin ETF and OTC products.

“You can work with regulators or you can really try to piss them off… If you really want to do the latter, then you should expect that they will bring every tool they have against you.”

Anthony’s thoughts on BitMEX indictment, as published in Law360 article “BitMEX Case Seen as Blessing in Disguise for Crypto Sector”