The ETP issuer says a Tuesday CoinSnacks report was likely “commissioned by short sellers,” which the crypto-focused newsletter has denied.

The recent controversy surrounding DeFi Technologies Inc., a Canada-based provider of exchange-traded products (ETPs), highlights the complex interplay between market manipulation, short-selling, and investor communications in the crypto sector. The company's shares plummeted nearly 28% on June 18 following a critical report from the crypto-focused newsletter CoinSnacks.

Accusations and Denials

CoinSnacks Report: CoinSnacks published a report alleging that DeFi Technologies engaged in questionable marketing practices, including paid email campaigns and influencer promotions, to artificially inflate its stock price, which had surged 3,400% over the past year. The report suggested that this promotional activity, which involved high-profile crypto figures like Anthony Pompliano and Will Clemente, might not be sustainable or genuine.

DeFi Technologies' Response: DeFi Technologies vehemently denied these allegations, describing the report as defamatory and misleading. The company accused CoinSnacks of potentially being commissioned by short-sellers to intentionally devalue its stock. In a press release, DeFi Technologies stated that the report contained inaccurate, incomplete, and speculative information aimed at distorting the market's perception of its stock.

Market Impact

The immediate aftermath of the report saw DeFi Technologies' stock price drop from 3.10 Canadian dollars to 2.24 Canadian dollars, a significant decline of 27.7%. The stock showed a slight recovery by closing at 2.30 Canadian dollars on June 19, but the overall impact on investor sentiment was notable.

Stock Performance: Despite the recent drop, DeFi Technologies' stock is still up over 200% for the year. This substantial year-to-date gain underscores the volatile nature of the crypto market and the significant influence of market reports and investor perceptions.

Allegations of Market Manipulation

DeFi Technologies suggested that the report might be part of a "short and distort" strategy, where short-sellers disseminate negative information to drive down a stock's price, allowing them to profit from their short positions. The company mentioned being approached unsolicited by a Canadian investment bank with a peculiar bought-deal offer, which they found suspicious given their strong financial position. This bank, DeFi Technologies claimed, has a history of working with short-sellers, raising further suspicions about the motivations behind the negative report.

CoinSnacks' Defense

CoinSnacks defended its report, stating on X (formerly Twitter) that it had never been paid by a short-seller to cover any company and that none of its team held positions in DeFi Technologies stock. This defense was aimed at countering DeFi Technologies' claims of a coordinated effort to manipulate its stock price.

Regulatory and Market Context

Regulatory Action: DeFi Technologies indicated that it had contacted the Canadian Investment Regulatory Organization to report the potential for market manipulation. This move signals the company's intention to address the issue through official channels and highlights the ongoing challenges of regulating the rapidly evolving crypto market.

Investor Communications: The situation underscores the importance of transparent and ethical communication practices in maintaining investor trust and market integrity. Companies in the crypto space must navigate these complexities while ensuring compliance with regulatory standards and maintaining robust investor relations.

Conclusion

The dispute between DeFi Technologies and CoinSnacks reflects broader issues in the crypto industry, including market manipulation, the role of influencers, and the impact of short-selling. As the market continues to mature, these challenges highlight the need for clear regulatory frameworks and ethical business practices to protect investors and maintain market stability.