Binance Founder Calls For DAT Firm Audits After QMMM Rug Pull

Binance founder Changpeng Zhao has called for audits of DATs. Zhao expressed this view following an alleged rug pull by QMMM Holding, a crypto treasury firm.

An X account cited a report from the Chinese media group Caixin. It claimed that the QMMM office in Hong Kong has been vacated. The account is described as the first instance of the MicroStrategy company running away.

CZ Calls for DATs to Use Third-Party Custodians

According to Zhao, DATs should use third-party crypto custodians. He explained that this type of custody and audit is mandatory for all DATs. His venture capital firm requires it for every investment.

He said:

“All DAT companies should use 3rd party crypto custodians with account setup audited by investors. This is a prerequisite for any @yzilabs investments in any #BNB  DATs.”

Zhao added that transparency is necessary for the crypto industry to thrive. Many others also agreed with Zhao, noting that this should be a standard.

Meanwhile, clarity around the status of QMMM Holdings remains for investors. The company gained attention after its September announcement. It revealed plans to invest $100 Million in Bitcoin, Solana, and Ethereum for its treasury.

QMMM Holding stock soared in response to the news at the time. Its stock rose more than 1800%, going from $11 to over $207 before declining to $119.40.

However, the US Securities and Exchange Commission (SEC) temporarily suspended trading for QMMM on September 30. At the time, the SEC expressed concerns about stock manipulation.

They cited multiple instances where the stock was recommended to investors on social media. The regulator further stated that QMMM likely inflated the actual size of its crypto allocations.

With further reports indicating that the company has now shut down, its stock may be delisted from the Nasdaq. This could result in significant losses for investors who purchased it due to its exposure to cryptocurrencies.

Scrutiny Around DATs Intensifies

Meanwhile, the QMMM incident is likely to increase scrutiny of DATs. The Wall Street Journal reported that regulators are investigating DAT companies. The probe includes the Financial Industry Regulatory Authority (FINRA).

With over 200 companies adopting crypto treasuries in one form or another, concerns about the risks have also grown. Several crypto treasury companies are facing difficulties. The struggles are most severe for those who raised capital through Private Investment in Public Equity (PIPE).

According to CryptoQuant data, all Bitcoin PIPE companies are already trading close to or below their PIPE value. For instance, Strive (ASST)  is now below $1 even though it raised at $1.35.

However, it is not just DATs that are raised through PIPE that are struggling at the moment. Even major ones, such as Strategy and Metaplanet, have also seen their stock value drop.

Metaplanet is currently trading at 402 Yen and has lost 32% of its value over the past month. MSTR has also declined to $288 after declining 13% within the same period. Despite this drop, Strategy still has an mNAV of 1.43. This shows that it is still trading at a premium to its BTC holdings.

However, the recent decline in BTC value and that of other crypto assets raises concerns about their health. Even stakeholders acknowledged this, with BitMine chairman Tom Lee noting that the DAT bubble might have burst.