In a year marked by dramatic price movements, the launch of Bitcoin ETFs, new all-time highs, and everything else that comes along with a crypto bull market, few stories are as compelling – and potentially controversial – as the meteoric rise of DeFi Technologies Inc. (DEFTF).

From trading on the verge of collapse at just $0.06 in 2023, the company’s stock has surged over 3,400% in the past twelve months, dwarfing the gains of bitcoin, ether, and Solana combined.

However, a recent promotional campaign spearheaded by Anthony Pompliano, a prominent crypto investor and personality, has raised critical questions about the transparency and motivations behind this rally.

Livin’ on a Thin Line

The story of DeFi Technologies Inc. starts in February 2021, after the board transitioned to a single-purpose company from a shell entity dating back to 1986.

This change signaled a strategic pivot from being a general investment issuer –rolling up assets without a specific focus from precious metal exploration firms to tech startups — to a focused player in the decentralized finance (DeFi) sector.

Nevertheless, the company launched with a simple premise: To help “bridge the gap between traditional capital markets and decentralized finance” and a mission to “expand investor access to industry-leading decentralized technologies.”

In June 2022, following the collapse of FTX and the ensuing bear market, the company changed its name to Valour Inc, a wholly-owned subsidiary at the time that focused on creating Exchange-Traded Products (ETPs).

Just 13 months later, in July 2023, Valour Inc. reverted back to its original name, DeFi Technologies.

That just about catches us up to where we are today.

The company generates revenue primarily through Valour, managing flagship products such as Bitcoin Zero and Ethereum Zero, along with various ETP listings across European exchanges and banks that synthetically track the value of a single DeFi protocol.

Now comes the first kicker…

Despite all the product offerings and strategic transitions, the company’s financials have always painted a troubling picture.

For the year ending in 2023, DeFi Technologies reported a working capital deficiency of C$76 million and a net loss of C$18.9 million.

This financial strain was made apparent to investors through the stock price, which was trading as a penny stock without much retail interest for most of 2023.

Giving credit where it’s due, Q3 2023 Financial Results did show signs of progress. While this was when the entire crypto market was rebounding, Valour did witness a surge in AUM, growing revenues, and improving net losses. Striking while the iron was hot, the company also started aggressively announcing new product offerings towards the end of 2023.

But still, the financial statements did not show anything that would indicate the hockey-stick trajectory we’re seeing today.

That wasn’t until we saw a few notable names talking the company up as “undervalued” to fully understand what was actually going on…

Pompliano’s Promotional Blitz

While Anthony Pompliano has been an advisor to DeFi Technologies since 2021, he has been relatively silent about the company.

That all changed on January 9th, 2024, when it was announced that Pompliano’s research firm, Reflexivity Research, which he founded with Will Clemente, had been acquired in an all-stock deal by DeFi Technologies.

Reflexivity Research Has Been Acquired By DeFi Technologies

We are announcing this morning that Reflexivity Research (@reflexivityres), a company that I co-founded with Will Clemente (@WClementeIII), has entered into a binding LOI to be acquired by DeFi Technologies, a publicly… x.com/i/web/status/1…

— Pomp 🌪 (@APompliano)
Jan 9, 2024

While the stock fell more than 40% following the news, the deal would eventually turn out to be quite a success. That’s because it was consummated in locked-up stock.

In connection with the Acquisition, DeFi Technologies acquired all issued and outstanding securities of Reflexivity Research for 5 million common shares of DeFi Technologies (the “Payment Shares”). The Payment Shares are subject to a lock-up schedule of 12 months, with the Payment Shares being released in equal tranches every three months, underscoring mutual confidence in the enduring value of this joint venture. No finder fees were paid in connection with the Acquisition.

In essence, DeFi Technologies was able to pay ~$3.1 million to retain one of the most influential crypto voices as a spokesperson. By locking up Pompliano’s shares, he would, in theory, be incentivized to continue promoting the company.

And promote the company he did – on both his Substack and X account.

Now, let’s be clear: Pomp states in every post that he is a shareholder of the company. We would love to see him also include that he is an advisor to DeFi, where his face is used on the company’s investor deck – but perhaps that is just wishful thinking.

Pomp’s two Substack posts discussing DeFi Technologies led to some of the most highly traded days by volume in recent history.

But Pomp’s influence doesn’t stop at retail volume. It also influences fund managers such as EMJ Capital’s Eric Jackson, who took a position in DeFi after learning about it from Pompliano.

After reviewing a tweetstorm by @APompliano earlier this year on why he was long DeFi and doing more investigation as well as running its metrics through our AI algorithm, I decided to take a long position in the company. We could decide to exit in the future but I don’t expect to for a while as long as such a valuation gap exists and some exciting potential catalysts this year.

It even led Jackson to go on CNBC and promote the company.

In response to questions from CoinSnacks about whether Eric is a paid spokesman in any way, a DeFi representative stated, “Absolutely not, he discovered us via Pomp then decided to look into us. We were very surprised when he had us as a stock pic on CNBC…”

While Pompliano’s promotion may be technically legal, it would be naive to believe that he doesn’t have an outsized influence on the stock price. An influence that surely would have been calculated by DeFi Technologies during the acquisition.

But perhaps the more interesting aspect of DeFi’s recent stock price increase is that Pompliano’s endorsements are part of a broader, well-coordinated IR campaign.

The Coordinated Campaign

On June 3rd, a press release about DeFi Technologies’ new business line, DeFi Alpha, buried a disclosure that the company had engaged a marketing firm to generate positive coverage.

Engagement Of Gold Standard Media LLC

The Company is also pleased to announce that it has entered into an agreement with Gold Standard Media, LLC and their affiliates (“GSM”), pursuant to which GSM will provide certain marketing services to the Company, effective May 13, 2024 (the “GSM Agreement”). The services provided by GSM will be to publish and distribute information regarding the Company through multiple platforms including digital marketing, email marketing, and influencer marketing. Pursuant to the GSM Agreement, GSM shall provide services to DeFi Technologies for a period of 12 months for US$500,000 and a grant of 1,500,000 deferred share units of the Company.

To summarize, DeFi Technologies paid GSM $500,000 in cash and gave them 1.5 million shares of the company to promote the stock through various outlets.

Furthermore, on May 28, Wallace Hill Partners LTD – an affiliate of GSM – reportedly purchased 1.5 million shares of DeFi Technologies.1

When asked for comment regarding the deal with GSM, a DeFi Technologies representative stated that “every public company promotes their stock in some fashion or another. We publicly disclosed the engament (sic) of GSM prior to the camapaigns (sic) we are running… Public companies also compensate vendors and employees with shares.”

So, what does this deal look like in practice? It involves an email campaign from GSM-owned properties in conjunction with a social media influencer push.

The Email Campaign 

Beginning on or around June 3, GSM’s outlets began sending email newsletters hyping up DeFi Technology.

For example, on June 3, Future Money Trends sent an email with the subject line, “Pompliano and I Think This CRYPTO Stock Is the Best!.”

Over the next ten days, Future Money Trends sent no fewer than 15 emails promoting DeFi Technologies.

A collection of emails sent by Future Money Trends

These emails consistently promote Pompliano’s involvement, Eric Jackson’s tweet about the company, and an “analyst target.”

Speaking of analyst targets, the $3.00 share target touted by GSM is from Zack’s Investment Research, which was paid directly by DeFi Technologies.

Now, being paid to initiate coverage isn’t new. Companies like Zack’s do it all the time. However, some may find an issue with the fact that the company hired to promote a stock is referencing a target that was paid for by the original company.

Furthermore, the paid analysis made its way into Eric Jackson’s analysis, which we covered above.

Bloomberg consensus is that they will do $104M in revenues this year and $81M in net income (78% net margins); then $143M in revenues in 2025 with net income of $125M.

“Bloomberg consensus” is code for two analyst estimates of which one is paid for.

The Influencer Push

At the same time that the email campaign is occurring, GSM also engages a group of YouTube, Instagram, and Reddit influencers to promote the company.

For example, Vosk Coin, a crypto-focused YouTube channel with 634k subscribers, was paid $8,000 to record a video touting DeFi Technologies.

Another example is the YouTube channel My Financial Friend, which was paid $7,000 to disseminate this information.

Controversial Connections and Past Missteps

Adding to the scrutiny are DeFi Technologies’ connections to figures like Teeka Tiwari, who was brought on as Executive Chairman of the advisory board at the company in 2021, just days before Pompliano became involved.

At the time, Tiwari was a lead Editor for Legacy Research, a subsidiary of MarketWise (MKTW). The company offered subscriptions in exchange for “independent” financial research and monthly stock or digital asset recommendations, among other things.

While at Legacy Research, an analyst, Jon “William” Mikula, who worked closely with Tiwari, was surreptitiously paid by a merchant bank with a large direct ownership stake in DeFi Technologies.

Ultimately, Mikula would be charged by the SEC for conspiracy to commit securities fraud. Mikula was fired from his position before the charges were made public after an employee raised concerns with senior management.

“According to the charges, from December 2019 through August 2021, Mikula was surreptitiously receiving large payments for recommending low-quality stocks to subscribers of Palm Beach Venture, while claiming falsely that his work was independent.”

Porter Stansberry, CEO Marketwise

For these actions, Tiwari was also eventually fired from MarketWise for conflicts of interest.

“It was a violation of Tiwari’s contract and of company policy for him to receive compensation from anyone that owned shares in companies Tiwari was recommending to Legacy Research’s subscribers – something that happened on four occasions.”

Porter Stansberry, CEO Marketwise

While this does not directly implicate Tiwari in receiving compensation from DeFi Technologies to promote specific investment ideas to Legacy Research subscribers, the connection is troubling.

One would think that the Executive Chairman of the advisory board would be aware that a bank directly involved with the company was paying an analyst who worked alongside him.

While this wouldn’t be the first accusation against individuals involved in the creation and operations of DeFi Technologies, we will save that for another day.

Investor Beware: The Real Risks

While the ongoing bull market in crypto may continue to help DeFi Technologies’ stock, the underlying financials, and the aggressive promotional strategies suggest significant risks.

Investors should be particularly cautious of potential sell-offs once the lock-up periods on shares expire.

By now, we all know that rug pulls can happen anytime in the far corners of the crypto market, especially with the rise of memecoins. But perhaps this can be a reminder that public stocks are no exception to the rule.

The financial statements show a company that, despite increased revenues and liquidity, is bleeding money and accumulating debt at an alarming rate.

From there, we could continue dissecting DeFi Technologies’ growth prospects, such as their DeFi Alpha arm, which has reportedly generated $83.4 million in revenue thus far in Q2.

But we’ll let investigators take it from here to decide whether this company is truly undervalued or not.

Ultimately, we have no hard evidence that anything DeFi Technologies is doing is illegal. These are not criminal accusations by any means. Is it shady business? There’s an argument to be made.

The problem for DeFi Technologies really is that their promotional IR blitz has worked out so well. Between the influencer pumps, getting mentioned on CNBC, the email campaigns, and Pomp pomping, there is now strong evidence that the stock isn’t rallying for the right reasons.

With investor enthusiasm rising alongside a buzzy bull market, this is when retail investors who fail to conduct due diligence can get hurt.

Pomp’n The Brakes

As for Pompliano, one can only wonder what inspires a person of this stature –the personality often invited on Bloomberg and CNBC – to become involved.

It’s one thing to hype up a company you’re involved in. It’s another to pound the table on a mystical undervaluation to millions of investors, multiple times, in the middle of a well-orchestrated IR campaign.

Comparisons to his past incidents in the crypto space are only inevitable.

Pompliano, who briefly served on the board of the now-bankrupt BlockFi and endorsed the infamous FTX, has been criticized for similar promotional activities that ended poorly for many investors.

The echoes of these past controversies add a layer of skepticism to his current promotion of DeFi Technologies.

We would be remiss to publish an article like this without mentioning our own involvement with promotional campaigns. At CoinSnacks, we are no saints either. We have in the past received compensation for advertising public companies in our newsletter. At no time did we ever hold shares or serve as advisors to the company.

We say that to say this: what started out as naivety has led us down the rabbit hole of campaigns such as DeFi’s. Our goal here at CoinSnacks is to inform our readers of what we personally believe to be good and, at times, bad investments.

Disclaimer: Neither CoinSnacks, nor any of CoinSnacks employees, hold shares in DeFi Technologies. This article is not investment advice and represents the opinions of its author.

1  CoinSnacks was unable to verify this amount of shares traded. There is no day around May 28th where 1.5 million shares were exchanged. If anyone has information regarding this please let us know.

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