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So far this year, billions of dollars have flowed into companies that have reinvented themselves by making the buying and holding of cryptocurrency their main focus. More than 200 public companies have announced plans to hold crypto on their balance sheets as so-called digital asset treasury companies, or DATs.

The rebranding as crypto companies came after years of losses in a variety of niche enterprises that include making lavender-flavored vodka, manufacturing materials for indoor marijuana growers, and selling ozone-infused water as part of a “nanobubble” cleaning technology.

The trend has attracted a wide range of people, from obscure to more well-known investors.

“We’re going to change finance forever, it’s that simple,” President Donald Trump’s son, Eric Trump, in August at a Nasdaq opening bell ringing ceremony for a new DAT focused on a cryptocurrency founded by the Trump family. “It’s a great milestone for our country.”

But just how transformative the DAT craze will be remains to be seen, as questions mount about the sustainability of this trend. Many new DATs have seen prolonged stock slides after receiving an initial bump.

“We are probably past peak DAT, if we’re being honest about it,” said Austin Campbell, the founder of Zero Knowledge Consulting and an adjunct professor at New York University’s Stern School of Business.

How DATs work

Publicly traded companies turn themselves into DATs by raising money through the sale of stocks and then use that money to buy types of crypto. The money is often raised from private investors, sometimes with ties to the type of cryptocurrency the new DAT will stockpile.

In 2020, the tech firm MicroStrategy became the first DAT when it started accumulating bitcoin, the world’s oldest and most popular cryptocurrency. Led by ultra bitcoin evangelist Michael Saylor, the company’s stock price has been one of the best performing in the past five years.

The success of MicroStrategy, which has rebranded as Strategy, has spawned dozens of imitators. The first wave of crypto treasury companies focused on bitcoin while more recently companies have started buying large stakes in more niche and unproven forms of cryptocurrency.

One reason DATs are booming is that buying and managing crypto holdings—especially newer tokens—can be daunting for newcomers.

S.Y. Lee, founder of the crypto project Story, said even sophisticated investors hesitate to manage digital wallets. DATs make the process as simple as buying a stock.

“Here you just go to your brokerage account … you just buy the shares,” Lee said in an with CoinDesk.

His crypto company, which focuses on trying to monetize intellectual property, has been backed by the heavy-hitting venture capital fund a16z crypto. Story recently partnered with Heritage Distilling, a Washington-based maker of chocolate-flavored whiskey and lavender vodka, to form a new DAT.

For struggling companies, becoming a DAT is a way to reinvent their brand and take advantage of a growing cryptocurrency market while raising new capital.

It can also mean big payouts to some of the company executives and others involved. Mill City Ventures, a company that developed an online poker game and offered high-interest loans before it became a DAT focused on the cryptocurrency Sui, has agreed to pay at least $1 million a year in fees to a firm managing its crypto.

Multiple pivots

Justin Sun is one of the most visible figures in crypto. The founder of the Tron blockchain, Sun is a billionaire who has been a key investor in Trump family crypto projects and was invited earlier this year to a .

Sun has also been in legal fights with former employees who alleged abuse, the media mogul David Geffen, who alleged Sun committed fraud related to the sale of a pricey sculpture, and the which accused of him of market manipulation and improperly paying celebrities like Lindsay Lohan and Jake Paul to tout Sun’s crypto.

That case was shortly after Trump took office and Sun made a triumphant appearance on Wall Street in July when he wore a tuxedo to help ring Nasdaq’s to mark a new Tron-focused DAT.

The company that turned to Sun’s crypto for its treasury is SRM Entertainment, a firm with a history of losses that sells theme park knickknacks. Company CEO Richard Miller has taken a winding road to being a top executive at a crypto-focused company. He cut his teeth as a broker at Stratton Oakmont, an infamous boiler room brokerage featured in “The Wolf of Wall Street,” where he once agreed to pay $125,000 to settle customer complaints of wrongdoing, according to regulatory documents.

Miller later got into the skincare business. A company that previously acquired SRM Entertainment that he helped run marketed sunscreens that claimed to also repel and .

In the days after the company announced it was transitioning to a Tron-focused DAT, Miller exercised stock options that allowed him to buy shares for 56 cents each and then sell them just as the stock was peaking for more than $10. Miller’s total stock sales totaled more than $1 million. The stock price has fallen significantly since then.

SRM Entertainment previously spun off from a firm that also recently became a DAT. Safety Shot, which markets a drink claiming to lower blood-alcohol levels by as much as 50% in 30 minutes, had a varied history before becoming a DAT focused on a dog-themed meme coin cryptocurrency called Bonk earlier this year.

Safety Shot and its predecessors’ product history include health products meant to address herpes cold sores, hair loss and “women’s sexual wellness.” The company has been accused of taking unethical steps to try to boost flagging stock prices.

Organizers for the Coachella Valley Music and Arts Festival sued the company last year after alleging it released a “bogus press release” indicating it was a festival sponsor. A judge later issued an injunction against Safety Shot.

Trump family-linked DAT has rocky history

Alt5 Sigma was a little-known fintech company before it pledged in August to buy $1.5 billion worth of the Trump family’s World Liberty Financial tokens.

The company, which has previously operated a household appliance recycling business and developed pain drugs, has a rocky history. Its predecessor, JanOne, was sued by the SEC in 2021 for allegedly conspiring to issue false financial reports. JanOne settled without admitting wrongdoing. The SEC continues to pursue a case against former CEO Jon Isaac, whose father now serves as Alt5’s president.

Alt5’s ��ɫtv subsidiary was recently convicted of money laundering in Rwanda, and the company has also been accused of conspiring with its former chief financial officer to hide stock from creditors, according to its SEC . Alt5 has denied any wrongdoing.

Eric Trump was initially set to join Alt5’s board of directors, but the company said that he would instead be an “observer” in order “to comply with Nasdaq’s listing rules.”

History repeats?

The DAT craze is not the first time publicly traded companies have taken hard pivots to crypto. During a crypto boom in 2017 and 2018, several companies rebranded as firms focused on blockchains, the technology that powers crypto transactions.

Photo company Kodak launched a crypto token called KodakCoin while a company called Long Island Iced Tea rebranded as Long Blockchain Corp. Several companies that underwent a crypto rebrand back then enjoyed short increases in their stock prices but did not find lasting success.

The Long Island tea company’s shift to crypto, for example, led to it being delisted from Nasdaq and several individuals being charged with insider trading. For companies that have pivoted to crypto more recently, the SEC’s to launch exchange-traded funds focused on niche forms of crypto could spell trouble.

But Jason Rozovsky, who is head of policy at the crypto firm Axelar, said the SEC’s move isn’t “necessarily bad news."

“Investor interest in bitcoin DATs has continued to grow, even as ETFs and other compliant options have become available, which suggests these structures may remain a durable part of the market.”