CZ calls for audit of DAT companies after alleged theft of QMMM carpets
CZ called for mandatory third-party custody and investor audits for Digital Asset Treasury (DAT) firms following the alleged "rug pull."
Quick Take
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QMMM Holdings, a DAT company, allegedly shut down and disappeared after its shares surged following the announcement of $100 million in cryptocurrency reserves.
In late September, the Securities and Exchange Commission (SEC) suspended trading in QMMM shares due to suspicions of price manipulation using social media.
CZ now calls on all DAT companies to accept third-party custody functions and allow investor audits to prevent fraud.
The incident highlights the urgent need for greater storage transparency and regulatory oversight in the DAT sector.
Following reports that US-registered QMMM Holdings may have suddenly ceased operations and disappeared, Binance founder Changpeng Zhao (CZ) called for stricter oversight of digital asset companies. Chinese crypto analyst AB Kuai.Dong called the case “the first microstrategy company to go bust,” reigniting debates about transparency and asset custody standards in the burgeoning DAT sector.
The Rapid Rise and Fall of QMMM
QMMM Holdings, which went public in July 2024, announced in early September its intention to invest $100 million in a cryptocurrency reserve comprising BTC, ETH, and SOL. This news sparked a surge in the stock’s value, increasing more than ninefold in three weeks. However, by the end of September, the U.S. Securities and Exchange Commission (SEC) suspended trading in QMMM shares, citing suspicions of price manipulation through social media.
CZ calls for transparency and audit of asset storage
Responding to the scandal, CZ wrote that all DAT companies must use independent custodians to store crypto assets and undergo account audits with the participation of investors. He added that these measures are now mandatory for all investments by YZi Labs, the venture arm associated with the Binance ecosystem.
According to CZ, market participants are increasingly concerned about how DAT companies manage investor funds. The DAT model, popularized by firms like MicroStrategy, allows public companies to hold crypto treasuries and issue shares backed by bitcoin reserves. However, the QMMM case demonstrates that the lack of independent auditing and investor verification creates fertile ground for abuse and fraud.
A community debate about asset storage methods
CZ’s statement sparked a heated debate in the crypto community. Some supported the idea of mandatory third-party auditing, noting that custody transparency is key to protecting investors. “I completely agree with this standard,” wrote user DeepBrainFeng, emphasizing that the level of transparency “often determines how far a DAT project can go.”
Others, including w3tester, suggested using multi-signature and self-custody, involving auditors and law firms as co-signers. They argued that this reduces reliance on custodial services and minimizes counterparty risks. Trendverse cautioned that for smaller DAT companies, mandatory third-party solutions could increase costs and hinder innovation, which runs counter to the spirit of Web3 decentralization.
Prospects for regulation of DAT companies
The QMMM incident revealed serious gaps in the regulation and auditing of DAT companies. As more and more firms utilize the “bitcoin treasury” model to attract investment, standards for verifying reserves and custody are becoming vital. CZ’s call was one of the first public initiatives by an industry leader to formalize oversight in this segment.
Whether it’s custodial audits, multi-signature wallets, or investor reviews, the message is clear: DAT companies need to earn trust through proven transparency, not promises. Today, QMMM serves as a stark reminder of the risks of the new era of digital treasuries, where unbridled hype can quickly turn into a resounding collapse.
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