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Alt5 Sigma, a key participant in the Trump family’s World Liberty Financial cryptocurrency venture, faces potential regulatory scrutiny after appearing to misreport the timing of its chief executive’s suspension to securities regulators by more than six weeks.
The publicly traded company informed the Securities and Exchange Commission (SEC) that it suspended CEO Peter Tassiopoulos effective October 16, despite an internal email that reportedly revealed that the board placed him on temporary leave on September 4. That discrepancy is what securities law experts say could have violated federal disclosure rules.
The September message, sent by Alt5 Sigma’s chief operations officer Ron Pitters and signed by director David Danziger, informed employees that a special board committee was investigating unspecified “certain matters concerning the company”.
Chief revenue officer Vay Tham was also placed on leave, according to the email obtained by Forbes from two sources close to the company.
Potential regulatory violations
Under SEC regulations, public companies must file a Form 8-K within four business days when an executive officer effectively stops serving in their role.
Sharing his insight on the matter, James Park, a securities law professor at UCLA, reportedly stated that materially false or misleading filings could violate federal anti-fraud provisions. “There is a high hurdle to establish such a violation,” Park noted, adding that prosecutors would need to prove intent and possibly harm to investors.
Alan Palmiter, a professor emeritus of securities law at Wake Forest University, was more direct about the stakes. “Knowingly filing false, material information is a sure way to get into lots of trouble,” he said. “The question then is, first, whether the SEC has the guts to investigate. And here, maybe not.”
An Alt5 Sigma spokesperson confirmed the board’s special committee is investigating matters, including a subsidiary’s legal troubles in Rwanda, where it was found criminally liable for illicit enrichment and money laundering.
The company is appealing the verdict whilst claiming it was the victim of fraud. However, Alt5 Sigma did not provide answers to the questions of whether the Rwanda issue was the reason behind the executive suspensions, nor did it explain the discrepancy in the SEC filing date.
The Trump connection
The timing of potential regulatory problems is particularly sensitive given Alt5 Sigma’s deep ties to World Liberty Financial, the crypto venture co-founded by Donald Trump and his three sons. In August, Alt5 Sigma accumulated 7.28 billion WLFI tokens through a circular deal that reportedly routed an estimated $500 million to an entity affiliated with the president.
A Trump-affiliated limited liability company owns approximately 38% of World Liberty Financial and is entitled to around 75% of proceeds from token sales.
As of Friday morning, Alt5 Sigma’s WLFI token holdings were valued at approximately $894 million, more than four times the company’s $205 million market capitalization. The company’s stock has plummeted about 80% from $8.42 when the World Liberty deal was announced to $1.67 at Thursday’s close.
What happens next?
The SEC, now chaired by Trump appointee Paul Atkins, declined to comment on whether it would investigate the disclosure discrepancy. So far, there is no evidence of company insiders trading Alt5 Sigma shares during the six weeks between the internal September message and the October filing.
Palmiter stated that while SEC action may be unlikely given the current political environment, private securities fraud class action lawsuits remain a possibility. “If there is a law firm interested in getting a little bit of lawyers’ fees, these securities fraud class actions are often prevalent,” he said.
Tassiopoulos remains an Alt5 Sigma employee and board member, according to a World Liberty Financial attorney.
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