suig_10k.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-K
________________________
(Mark One)
For the fiscal year ended December 31, 2025
OR
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 001-41472
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SUI GROUP HOLDINGS LIMITED
(Exact name of Registrant as specified in its Charter)
________________________
(Address of principal executive offices) (Zip Code)
(952) 479-1923
(Registrant’s telephone number, including area code)
________________________
Mill City Ventures III, LTD
(Former name, former address and former fiscal year, if changed since last report)
________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class TradingSymbol(s) Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the common stock of the registrant held by non-affiliates of the registrant as of June 30, 2025, was approximately $3,496,000 based on the closing sales price of $1.83 per share as reported by the Nasdaq Capital Market. As of February 20, 2026, there were 76,802,872 shares of the registrant’s Common Stock, $0.001 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
SUI GROUP HOLDINGS LIMITED
Form 10-K
Table of Contents
ITEM 1 BUSINESS 6
ITEM 1A RISK FACTORS 23
ITEM 1B. UNRESOLVED STAFF COMMENTS 44
ITEM 1C. CYBERSECURITY 44
ITEM 2. PROPERTIES 45
ITEM 3. LEGAL PROCEEDINGS 45
ITEM 4. MINE SAFETY DISCLOSURES 45
ITEM 6 RESERVED 47
ITEM 7.A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 54
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA F-1
ITEM 9A CONTROLS AND PROCEDURES 55
ITEM 9B OTHER INFORMATION 55
ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 55
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 56
ITEM 11 EXECUTIVE AND DIRECTOR COMPENSATION 59
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES 68
ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 69
SIGNATURES 72
Cautionary Statement Regarding Forward-Looking Statements
This annual report on Form 10-K (the “Annual Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements relate to future events or future financial performance of Sui Group Holdings Limited (the “Company,” “Sui Group,” or “we”), and can ordinarily be identified by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar words. Some of the forward-looking statements contained in this Annual Report relate to, and are based on the Company’s current assumptions regarding, the following:
· the expected benefits of the Company’s rebranding;
· the ability of the Company to execute on its business plans;
· the Company’s digital asset treasury strategy;
· the digital assets to be held by us and their future performance;
· the success of the Company’s portfolio investments;
· the Company’s relationships with third parties;
· the Company’s regulatory structure and tax treatment;
· the adequacy of the Company’s cash resources and working capital; and
· the timing of cash flows.
Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Applicable risks and uncertainties include, among others, the Company’s ability to achieve profitable operations; fluctuations in the market price of SUI (“SUI”) and other digital asset tokens that will impact the Company’s accounting and financial reporting; government regulation of cryptocurrencies; changes in securities laws or regulations; changes in business, market, financial, political and regulatory conditions; risks relating to the Company’s operations and business, including the highly volatile nature of the price of cryptocurrencies; the risk that the Company’s stock price may be highly correlated to the price of the digital assets that it holds; risks related to increased competition in the industries in which the Company does and will operate; risks relating to significant legal, commercial, regulatory and technical uncertainty regarding digital assets generally; risks relating to the treatment of cryptocurrency assets for U.S. and foreign tax purpose; expectations with respect to future performance, growth and anticipated acquisitions; potential litigation involving the Company or the validity or enforceability of the intellectual property of the Company; global economic conditions; geopolitical events and regulatory changes; access to additional financing, and the potential lack of such financing; and the Company’s ability to raise funding in the future and the terms of such funding, including dilution caused thereby, as well as other risks and uncertainties discussed in “Item 1A. Risk Factors” in this Annual Report and in other filings made by the Company from time to time with the Securities and Exchange Commission (the “SEC”). The Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances occurring after the date of this filing. The forward-looking statements made in this Annual Report relate only to events as of the date on which the statements are made.
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Summary of Risk Factors
Below is a summary of the principal factors that make an investment in our common stock, par value $0.001 per share (the “Common Stock”) speculative or risky. This summary does not address all of the risks we face. Additional discussion of the risks summarized in this Risk Factor summary, and other risks that we face, can be found below and should be carefully considered, together with other information included in this Annual Report.
Risks Related to Our SUI Treasury Strategy
· Our SUI strategy exposes us to risk of non-performance by counterparties.
· Shareholders may not receive the benefits of any forks or airdrops.
· Exposure to market abuse and manipulation may affect the market price of SUI.
· We face other risks related to our SUI treasury business model
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Risks Related to Our Portfolio Investment
Risks Related to Our Operations and Ownership of Our Common Stock
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PART I
ITEM 1 BUSINESS
Overview
Sui Group Holdings Limited, formerly known as Mill City Ventures III, Ltd., is a Minnesota corporation headquartered in Wayzata, Minnesota. The Company was originally incorporated as Mill City Ventures III, Ltd. in the State of Minnesota on January 10, 2006. From our inception until December 13, 2012, we operated as a development-stage company involved in the gaming and entertainment industry. In 2013, we elected to become a business development company (“BDC”) under the Investment Company Act of 1940 (the “1940 Act”). We operated as a BDC until we withdrew our BDC election on December 27, 2019.
Following the withdrawal of our BDC status, we operated as a publicly traded specialty finance company focused on short-term, non-bank lending solutions, which we refer to as our portfolio investment business. Our portfolio investment business focused on providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid again becoming subject to regulation under the 1940 Act, we monitor our holdings as a whole with the aim of ensuring that no more than 40% of our total assets may consist of “investment securities,” as that term is defined and understood under the 1940 Act.
In 2025, we undertook a strategic shift by launching the industry’s first SUI treasury strategy, under which the principal holding in our treasury reserve on the balance sheet is allocated to the native cryptocurrency of the Sui blockchain (commonly referred to as “SUI”). Since the launch of our digital asset treasury strategy, we have established the largest publicly traded SUI treasury, backed by an exclusive relationship with the Sui Foundation (the “Sui Foundation”), an independent organization dedicated to the advancement and adoption of the Sui network.
On August 26, 2025, we formally changed our name to Sui Group Holdings Limited, following an amendment to our Articles of Incorporation filed with the Officer of the Minnesota Secretary of State. In conjunction with the name change and the rebranding, we changed our ticker symbol from “MCVT” to “SUIG”, aligning our public identity with our core blockchain initiatives.
SUI Treasury Management Business
We execute our SUI treasury management business by acquiring SUI tokens through open-market purchases, institutional-grade deal flow typically reserved for cryptocurrency funds, and a negotiated purchase agreement with the Sui Foundation. This structure enables broader investor access to SUI through a publicly traded vehicle. As the only SUI treasury with Sui Foundation support, we believe that we are uniquely positioned to capitalize on technology trends and ecosystem growth relating to SUI, while providing liquid, and institutional-grade access to blockchains designed for scalability and global adoption.
We view SUI as our core holding and expect to continue to accumulate SUI. We have not set any specific target for the amount of SUI we seek to hold, and we will continue to monitor market conditions in determining whether to engage in financing to purchase additional SUI. This overall strategy also contemplates that we may (i) periodically sell SUI for general corporate purposes, including to generate cash for treasury management, acquisitions, or strategies that generate tax benefits in accordance with applicable law, and (ii) pursue strategies to create income streams or otherwise generate funds using our SUI holdings.
As of December 31, 2025, we held 105 million SUI tokens in our treasury, representing $147 million in digital assets, and had loaned an additional 3 million SUI tokens. This equates to approximately 1.34 SUI per share of Common Stock and Pre-Funded Warrants (as defined below) issued to certain investors involved in the Private Placement. A significant majority of these holdings continue to be staked, generating an annualized yield of approximately 1.7% with the remaining holdings deployed toward higher yield-generating lending opportunities. These assets reflect our strategic commitment to the Sui blockchain infrastructure and serve as a flexible source of liquidity for future acquisitions and operational portfolio investments.
On February 11, 2026, the Company announced that its native synthetic dollar, eSui Dollar (“suiUSDe”), launched on Sui Mainnet. Additionally, SUI Group announced the deployment of $10 million in newly minted suiUSDe into a vault operated by Ember Protocol, a vault and investment infrastructure provider incubated by the team behind Bluefin.
Staking
A significant majority of the Company’s SUI holdings are currently staked. Going forward, the Company intends to continue staking up to 100% of the SUI that has not been deployed toward other yield and investment opportunities to earn a yield of approximately 1.7% per annum based on daily average earnings data provided by the Company’s custodian, BitGo Bank & Trust, National Association (f/k/a BitGo Trust Company, Inc.) (“BitGo”).
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Staking is facilitated through one or more third-party staking service providers. The staking service provider instructs BitGo to delegate SUI to one or more validator addresses in accordance with the Company’s staking policy. Although the validator receives the delegated SUI for staking purposes, custody and control of the assets remain at all times with BitGo.
The Sui network operates using a Delegated-Proof-of-Stake system to secure and operate the network, meaning that the voting power of a validator in the network is determined by the amount of stake delegated to them by SUI token holders. The more stake delegated to a validator, the more voting power they have. In exchange for processing transactions and performing consensus, validators earn rewards based on the amount of transaction fees (the “Gas Fees”) collected. These rewards are then shared among stakers as staking rewards, which may be treated as income for U.S. federal income tax purposes. The amount of SUI the Company may receive as reward for its staking activity can vary significantly. The staking process is continuously adjusted in scale, in line with network and market conditions, to ensure the Company maintains sufficient liquidity for redemptions on any business day, subject to a one-day unbonding period.
Staking activities involve a potential risk of SUI loss. Staked SUI are not subject to the protections enjoyed by depositors with the Federal Deposit Insurance Corporation (FDIC) or Securities Investor Protection Corporation (SIPC) member institutions. In addition, the Sui network dictates requirements for participation in validation activity, and may impose penalties, or “slashing,” if the relevant activities are not performed correctly, such as if the staker acts maliciously on the network, “double signs” any transactions, or experience extended downtimes. If validators’ staked SUI are slashed by the Sui network, their assets may be confiscated, withdrawn, or burnt by the network, resulting in losses to them. In combination, they deter malicious validators from attacking blockchains.
The Company believes that the staking service providers with whom it contracts are reputable and will not engage in harmful behavior that could lead to slashing or penalties. Currently, the Company’s only staking service provider is Galaxy Digital LLC (the “Asset Manager”).
Hedging
The Company currently does not engage in derivative or hedging transactions. In the event the Company engages in derivative or hedging transactions in the future, it will notify investors via a prospectus supplement, current report on Form 8-K or annual or quarterly reports, as applicable, and/or on the Company’s website.
The Company’s Policies Related to Air Drops, Incidental Rights and Hard Forks
Airdrops: Airdrops refer to the distribution of digital assets to holders of an existing cryptocurrency, typically for promotional or network development purposes. The promoters of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital assets. Airdrops may be conducted by sending a token to the holders of set amounts of SUI. Alternatively, airdrops may involve a user being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. As such, a user entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. The Company intends to evaluate each airdrop on a case-by-case basis, together with the Asset Manager, and in consultation with the Company’s legal and compliance advisors, in order to assess the asset’s legitimacy, market viability and regulatory implications. We may choose to accept, hold, sell or distribute airdropped assets based on their alignment with our financial objectives, regulatory compliance requirements and operational capabilities, subject to internal governance procedures.
Incidental Rights: Incidental rights may arise when holders of a digital asset are granted additional privileges, such as voting rights, access to new tokens or other benefits associated with a blockchain protocol. The Company intends to review any incidental rights associated with our digital asset holdings to determine their economic and strategic value. If such rights are deemed material, we will disclose their receipt and our intended actions (e.g., exercising, transferring or declining such rights) in accordance with applicable securities laws and other applicable requirements. Decisions regarding incidental rights are made by our treasury team, with oversight from the audit committee (the “Audit Committee”) of the Company’s board of directors (the “Board”) to ensure compliance with corporate governance standards.
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Hard Forks: A “hard fork” occurs when a blockchain protocol undergoes a significant change, resulting in a divergence that may create a new digital asset. In the event of a hard fork affecting our digital asset holdings, we will assess the resulting assets’ technical stability, market acceptance and regulatory status. The Board, together with the Asset Manager, in collaboration with the Company’s legal and compliance advisors, will determine whether to claim, hold or dispose of any new assets created by the hard fork. We aim to act in the best interests of our shareholders, balancing potential financial opportunities with risks related to market volatility, regulatory uncertainty and operational complexity. Any material actions taken in response to a hard fork will be disclosed promptly to investors, including through timely press releases and regulatory filings, as required.
Private Placement and Digital Asset Purchase and Sale Agreement with Sui Foundation
On July 27, 2025, the Company entered into securities purchase agreements (the “Securities Purchase Agreements”) with the investors identified on the signature pages thereto (the “PIPE Investors”) and a related registration rights agreement in connection with the issuance and sale in a private placement of the following securities to the PIPE Investors for gross proceeds of approximately $450 million: (i) 75,881,625 shares (the “Common Shares”) of the Company’s Common Stock and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to an aggregate of 7,144,205 shares of Common Stock at an exercise price of $0.0001 per share (the “Private Placement”) paid for using a combination of cash and SUI tokens. The Company raised gross proceeds of approximately $138 million in SUI, approximately $53 million in USDT and approximately $259 million in cash and cash equivalents (the “Cash PIPE Proceeds”) in the Private Placement.
On July 27, 2025, the Company entered into a Digital Asset Purchase and Sale Agreement (the “Digital Asset Purchase and Sale Agreement”) with the Sui Foundation, pursuant to which the Company agreed to purchase, and the Sui Foundation agreed to sell and transfer certain SUI tokens as set forth in one or more confirmations. On July 31, 2025, pursuant to the Digital Asset Purchase and Sale Agreement and a subsequent digital asset purchase and sale agreement dated July 31, 2025, the Company used approximately $140 million of the Cash PIPE Proceeds to acquire SUI (the “Initial Purchased Digital Assets”). For the 12 months following the Private Placement, subject to market conditions, the Company intends to continue to use approximately $140 million of Cash PIPE Proceeds to acquire additional SUI, in the open market with the Asset Manager as execution trader. The USD price per SUI token purchased pursuant to the Digital Asset Purchase and Sale Agreement will be equal to the product of (i) 0.85 multiplied by (ii) the twenty-four (24)-hour time weighted average price on the Closing Date (as defined in the Digital Asset Purchase and Sale Agreement), as reasonably calculated by the Company. Pursuant to the terms of the Digital Asset Purchase and Sale Agreement, the SUI tokens purchased will be subject to transfer restrictions for a period of two years plus 30 days following purchase. Notwithstanding the foregoing, the transfer restrictions will not apply to the extent necessary to enable the Company to comply, or to be in compliance with, the provisions of the 1940 Act. The Digital Asset Purchase and Sale Agreement also provide to the Sui Foundation with certain rights (but not an obligation) to purchase additional SUI tokens offered by the Company in certain transactions for a two-year period after the Closing Date.
Custody of the Company’s SUI Holdings
On July 26, 2025, the Company and BitGo entered into a Custodial Services Agreement (the “Custodial Agreement”) under which BitGo agrees to safeguard the private keys and cryptocurrency assets that the Company deposits with it. BitGo’s custodial accounts are segregated and maintained offline for heightened security, and BitGo carries insurance policies that may cover certain losses. BitGo is a qualified custodian regulated by the South Dakota Division of Banking.
As a regulated custodian, BitGo is subject to a detailed statutory and regulatory framework, including holding customer assets in segregated client accounts on behalf of customers. Approximately 99% of the Company’s assets and private keys kept by BitGo are held in cold storage (i.e., offline) in segregated accounts and are never commingled with BitGo or other client assets. BitGo applies industry standards, such as CryptoCurrency Security Standard (CCSS) and SOC1 and SOC2, while also working with the most trusted brands in the industry and offering clients comprehensive insurance solutions.
The BitGo ecosystem and architecture for private key management include the BitGo platform, hardware security modules (“HSMs”) and modular services. The BitGo cold custody solution is built on BitGo’s security to manage keys on behalf of customers. BitGo only signs transactions that have been authorized by its sponsor and follow the policies set by the account administrators.
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The primary keys and backup keys are created offline using an Offline Vault Console (“OVC”) on air gapped laptops during a secure ceremony to create hardened cryptographic seeds that power the BitGo solution. This is to ensure only machines that have no access to the internet and are pristine are able to see private key material.
Undisclosed personnel at BitGo hold the sharded keys (i.e., keys split into multiple fragments, called shards). When they are reconstituted, they are able to sign a transaction which moves funds in the public blockchain. To mitigate collusion, the individuals who have the sharded keys are different from those who have access to the vaults where the signings happen.
The private key is reconstituted in the OVC, but only in internal memory. At no point is it displayed or shown to any user. After signing is done, the key is no longer available in memory. The OVC is run in a read-only disk, so once the laptop is powered off, there is no non-volatile storage of any kind to write back to disk. The OVC operates using a RAM disk, where it simulates a real hard disk, but it is completely ephemeral and is wiped as soon as the machine is power cycled or rebooted, thus wiping the reconstituted private key and preventing it from being copied or compromised.
BitGo is a South Dakota trust company, and the private keys are strategically distributed across various geographic locations within the United States. In order to enhance security measures, BitGo refrains from disclosing the exact locations of these keys.
At the time of wallet creation, BitGo creates a unique key pair within its HSMs in order to give each client a unique wallet on-chain. These online keys are wrapped by the BitGo HSM and stored within BitGo’s data vault for the BitGo platform keys used to sign transactions.
As all custody wallets are segregated, the existence of SUI held by the Company can be verified on-chain by the Company or any other authorized party.
BitGo cold wallets are supported by a $250 million insurance policy issued by Lloyd’s of London. The specifics of the policy include cyber insurance, errors and omissions insurance, and general specie. Any copying and theft of private keys, insider theft or dishonest acts by BitGo employees or executives, and loss of keys directly related to BitGo’s custody of keys should be covered by this amount. This insurance policy is shared among all of BitGo’s clients and is not specific to the trust or to customers holding SUI and may not be available or sufficient to protect the trust from all possible losses or sources of losses. The Company may purchase additional insurance coverage through BitGo’s underwriter, although the Company has not purchased such additional insurance cover as of February 20, 2026. BitGo is not FDIC insured. BitGo has established a business continuity plan that will support its ability to conduct business in the event of a significant business disruption. This plan is reviewed and updated annually, and can be updated more frequently, if deemed necessary, by BitGo in its sole discretion. Should BitGo be impacted by a significant business disruption, BitGo aims to minimize business interruption as quickly and efficiently as possible.
The Custodial Agreement commenced on July 26, 2025, and will continue for one (1) year, unless earlier terminated in accordance with the terms of the Custodial Agreement. After the initial term, the Custodial Agreement will automatically renew for one-year successive renewal terms, unless either party notifies the other of its intention not to renew with at least 60 days’ prior-notice. Either party may terminate the Custodial Agreement for a material breach if such breach is not cured within 30 days following written notice thereof. BitGo may suspend or restrict the Company’s access to the custodial services and/or deactivate, terminate or cancel the Company’s custodial account for any reason upon providing at least thirty (30) days’ written notice to the Company, or immediately if BitGo perceives a risk of legal or regulatory non-compliance associated with the Company’s custodial account activity, among other things. The Company may terminate the Custodial Agreement at any time upon providing at least 30 days’ written notice to BitGo, paying outstanding amounts and an early termination fee equal to the highest monthly fees due for any month of services before such termination multiplied by the number of months remaining in the term.
SUI, SUI Markets and Regulation of SUI
This section provides a more detailed description of SUI, including information about the historical development of SUI, how SUI is held, how SUI is used in transactions, how SUI is traded, the spot markets where SUI can be bought, held and sold, the SUI over the counter (“OTC”) market and SUI validating.
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SUI and the Sui Network
SUI is a digital asset that is created and transmitted through the operations of the peer-to-peer Sui network, a network of computers that operates on cryptographic protocols. No single entity owns or operates the Sui network, the infrastructure of which is collectively maintained by a broad user base. The Sui network allows people to exchange tokens of value, called SUI, which are recorded on a public transaction ledger known as a blockchain. SUI can be used to pay for transaction fees and network operations, including computational power on the Sui network, or it can be converted to fiat currencies, such as the U.S. dollar, at rates determined on digital asset trading platforms or in individual end-user-to-end-user transactions under a barter system. Furthermore, the Sui network was designed to allow users to write and implement smart contracts — that is, general-purpose code that executes on the network and can instruct the transmission of information and value based on a sophisticated set of logical conditions. Using smart contracts, users can create markets, store registries of debts or promises, represent the ownership of property, move funds in accordance with conditional instructions and create digital assets other than SUI on the Sui network. Smart contract operations are executed on the Sui blockchain in exchange for payment of SUI. Like the Ethereum network, the Sui network is one of a number of projects intended to expand blockchain use beyond just a peer-to-peer money system.
The Sui network primarily uses a delegated proof-of-stake consensus mechanism to incentivize SUI holders to validate transactions. Unlike proof-of-work, in which miners expend computational resources to compete to validate transactions and are rewarded coins in proportion to the amount of computational resources expended, in proof-of-stake, validators risk or “stake” coins to compete to be randomly selected to validate transactions and are rewarded coins in proportion to the amount of coins staked. Any malicious activity, such as disagreeing with the eventual consensus or otherwise violating protocol rules, results in the forfeiture or “slashing” of a portion of the staked coins. Proof-of-stake is viewed as more energy efficient and scalable than proof-of-work.
Unlike many other smart contract platforms that batch transactions into blocks, SUI validators individually validate transactions. SUI uses “Narwhal” and “Bullshark” as its memory pool and consensus engines, respectively, which supplement proof-of-stake by allowing transactions performed on SUI to be verified and executed in parallel, rather than sequentially like in prominent blockchains such as Bitcoin and Ethereum. Under Narwhal, instead of a proposing validator broadcasting all transactions in a block to the other validators, the proposing validators send references to transactions that other validators have already received in their local memory pools. These memory pools serve as logs of unprocessed transactions awaiting verification and execution on a blockchain. The transaction data can thus bypass the full consensus process, removing the large data transmission step which often impedes proof-of-stake consensus and introduces latency. Further unlike traditional blockchains, which add transactions in a single, linear sequence, Bullshark uses a structure whereby each transaction points to multiple previous transactions, allowing many transactions to be processed at the same time. The purpose of Narwhal and Bullshark is to increase scalability of a blockchain allowing for parallel processing of transactions and increasing transaction speed.
Founding
The Sui network was initially conceived in 2021 by Evan Cheng, Adeniyi Abiodun, Sam Blackshear, George Danezis, and Kostas Chalkias to continue research initially performed while the group was employed by Meta Platforms, Inc., in which they collaborated on a digital asset project called Diem (formerly known as Libra). Mysten Labs Inc. (“Mysten”), an independent consortium of blockchain software developers which has partially contributed to and continues to contribute to the development of the Sui network, formed as an outgrowth of the Diem project. The Sui Foundation is an independent nonprofit entity that supports research and development of open-source technology related to SUI.
Although Mysten and the Sui Foundation continue to exert significant influence over the direction of the development of SUI, the Sui network is distributed and does not require governmental authorities or financial institution intermediaries to create, transmit or determine the value of SUI.
Technology and Operation
Parallel Execution and Object-Centric Model
Unlike traditional blockchain models that rely on sequential transaction execution, SUI’s architecture enables parallel transaction execution, significantly increasing throughput. Transactions involving independent objects can be processed simultaneously, reducing bottlenecks. The object-centric model provides a more intuitive and developer-friendly way to structure smart contracts. Each object has a defined owner, allowing SUI to optimize state management and computation.
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Narwhal and Bullshark Consensus Mechanism
The Sui network employs a dual-layer consensus mechanism known as Narwhal and Bullshark, which decouples transaction ordering from execution. Narwhal is a key component of the Sui network’s consensus mechanism. It is a high-performance memory pool that organizes transactions into a directed acyclic graph structure. This organization allows for efficient transaction processing and reduces the likelihood of bottlenecks. Narwhal’s design ensures that the Sui network can maintain high throughput and low latency, making it suitable for applications that require rapid transaction processing.
Bullshark is the consensus protocol used by the Sui network, built on top of Narwhal. It is designed to achieve fast finality and high security. Bullshark uses a byzantine fault tolerant consensus mechanism, which ensures that the network can reach consensus even in the presence of malicious actors. This protocol is optimized for performance, allowing the Sui network to process a large number of transactions per second while maintaining a high level of security.
Smart Contracts and Development on the Sui Network
Smart contracts are programs that run on a blockchain that can be executed automatically when certain conditions are met. Smart contracts facilitate the exchange of anything representative of value, such as money, information, property, or voting rights. Using smart contracts, users can send or receive digital assets, create markets, store registries of debt or promises represent ownership of property or a company, move funds in accordance with conditional instructions and create new digital assets.
Development on the Sui network involves building more complex tools on top of smart contracts, such as decentralized apps and organizations that are autonomous, known as decentralized autonomous organizations, and entirely new decentralized networks. For example, a company that distributes charitable donations on behalf of users could hold donated funds in smart contracts that are paid to charities only if the charity satisfies certain pre-defined conditions.
In total, as of the date of this Annual Report, approximately 100 apps are currently built on the Sui network, including in the collectible non-fungible tokens (“NFT”), gaming, music streaming, and decentralized finance categories.
Additionally, the Sui network has been used for decentralized finance (“DeFi”) platforms, which seek to democratize access to financial services, such as borrowing, lending, custody, trading, derivatives and insurance, by removing third-party intermediaries. DeFi can allow users to lend and earn interest on their digital assets, exchange one digital asset for another and create derivative digital assets such as stablecoins, which are digital assets pegged to a reserve asset such as fiat currency.
Unlike tokens, which are primarily used for payments and transaction fees, NFTs represent ownership of unique digital or real-world assets. On the Sui network, NFTs can encode rights to in-game assets, digital art, music, or utility tokens within applications. NFTs are tradable across applications, contributing to a new, internet-native economy. This new paradigm allows users to own rights to other assets through NFTs, which enable users to trade them with others on the Sui network. For example, an NFT may convey rights to a digital asset that exists in an online game or a decentralized app, and users can trade their NFT in the decentralized app or game, and carry them to other digital experiences, creating an entirely new free-market internet-native economy that can be monetized in the physical world.
Overview of the Sui network’s Operations
In order to own, transfer or use SUI directly on the Sui network (as opposed to through an intermediary, such as a custodian), a person generally must have internet access to connect to the Sui network. SUI transactions may be made directly between end-users without the need for a third-party intermediary. The Sui network prevents double-spending by validating and recording transactions either through direct validator execution or, when needed, via consensus. Transactions involving shared objects are memorialized on the Sui blockchain to ensure consistency and prevent conflicts. This verification process is managed by validators who either directly execute transactions or reach consensus to include shared-object transactions in checkpointed blocks. These blocks form part of the Sui blockchain, which acts as a source of truth for shared state. Unlike traditional blockchains that rely solely on the sequential production of blocks for all transactions, the Sui network differentiates between independent and shared transactions. Independent transactions can be executed in parallel without global ordering, while only shared transactions require consensus and block inclusion.
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SUI Token Issuance
Initial Creation of SUI and SUI Supply
Unlike Bitcoin, which was solely created through a progressive mining process, 10 billion SUI were created in connection with the launch of the Sui network. Following the launch of the Sui network, no further SUI will be created unless a hard fork of the Sui network’s protocol occurs. The Sui network’s total supply of 10 billion SUI tokens is unlocked according to a distribution and unlock schedule designed to balance liquidity, stability, and long-term growth. The current unlock schedule is subject to adjustments as determined by the Sui Foundation to ensure a stable tokenomics model that supports the Sui network’s health and will be available for download via an application programming interface maintained by the Sui Foundation. According to the Sui Foundation, distributions of locked SUI tokens were made to Series A and Series B investors and early contributors beginning in April 2024, and distributions of locked SUI tokens were made to Mysten Labs Treasury beginning in October 2023.
The Sui network, or “mainnet” launched on May 3, 2023 with a portion of the total supply made liquid at launch. At or shortly after launch, the mainnet was supported by over 100 validators and over 400 nodes. DeepBook, the Sui network’s first native liquidity layer, launched in July 2023. This central limit order book gives DeFi protocols and other app builders a mechanism to support both market and limit token swaps. By mid-July 2023, the Sui network had approximately one million active wallets, rising to approximately three million active wallets by mid-August 2023, nine million active wallets by the end of November 2023, and over 120 million active wallets by mid-April 2025.
On September 13, 2023, zkLogin, a new primitive, launched on the Sui network, letting builders incorporate authorization through existing credentials from providers such as Google, Facebook and Twitch. This development significantly eased the onboarding path for new Web3 users.
By February 2024, DeFi protocols on the Sui network had reached $500 million in total value locked, putting the Sui network in the top ten blockchains by that metric. That number rose to $1 billion in total value locked by the end of September 2024, and $2 billion in January 2025. By April 2024, the beta version of the 2024 edition of the Move programming language became available, which added many useful new features, including method syntax, positional fields, and loop labels. On June 18, 2024, Mysten Labs announced the launch of Walrus, a decentralized data storage network that uses SUI as a coordination layer. Walrus launched on the Sui network in April 2025.
On August 6, 2024, engineers launched Mysticeti, a new consensus mechanism for the Sui network that could allow the Sui network to process shared object transactions with even less latency. In September 2024, Agora’s U.S. dollar-backed stablecoin (AUSD) arrived on the Sui network, giving DeFi users a new option for token purchases and swaps. The advent of a new coin AUSD on the Sui network, which was previously launched on Ethereum and Avalanche, was one of a number of native stablecoins on the Sui network. suiUSDe, which is the SUI-native version of USDC, another stablecoin, was added to the Sui network in October 2024, and FDUSD, yet another stablecoin, was added to the Sui network in November 2024.
The SUI token serves four purposes on the Sui network. First, SUI can be staked within an “epoch” in order to participate in the proof-of-stake mechanism. Second, SUI is the asset denomination needed for paying the Gas Fees to execute transactions or other operations on the Sui network. Third, SUI can be used as a versatile and liquid asset for various applications including the standard features of money — a unit of account, a medium of exchange, or a store of value — and more complex functionality enabled by smart contracts, interoperability, and composability across the Sui ecosystem. Fourth, and finally, SUI plays an important role in governance by acting as a right to participate in on-chain voting on issues such as protocol upgrades.
The SUI token powers a variety of real-world applications:
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Limits on SUI Supply
SUI has a total supply of 10 billion tokens, meaning no additional SUI will be minted beyond this limit unless a “hard fork” of the Sui network’s protocols occur, as described above. At network launch, a portion of the total supply was in circulation, while the remaining tokens are being released progressively over time, unless a hard fork of the Sui network’s protocols occur. The structured emission schedule is designed to support network security, incentivize validators and participants, and sustain the long-term growth of the Sui network. Additionally, pursuant to the Digital Asset Purchase and Sale Agreement, the Initial Purchased Digital Assets (approximately 42% of the Company’s SUI holdings as of December 31, 2025) are subject to a lock-up period of thirty (30) days after the two-year anniversary of the closing date.
Governance of the Sui Network and Modifications to the Protocol
SUI token holders participate in network governance by voting on protocol upgrades, fee adjustments, and validator policies and incentives. The governance model is designed to be inclusive and transparent, encouraging community-driven decision-making.
The Sui Foundation oversees ecosystem development, distributing funds for grants, research, and innovation to drive network growth. The Sui Foundation is an independent, non-profit entity established to support and advance the adoption, security, and sustainability of the Sui network. The Sui Foundation is dedicated to fostering an open ecosystem that empowers developers, users, and enterprises to build and interact with blockchain-based applications. As the primary steward of the Sui network, it plays a pivotal role in the protocol’s long-term development by overseeing ecosystem growth, allocating community resources, funding research initiatives, and ensuring governance transparency. The Sui Foundation operates in alignment with the principles of decentralization, innovation, and inclusivity, promoting an equitable and sustainable blockchain ecosystem.
The core development team behind the Sui network is Mysten, a blockchain technology company focused on developing innovative and scalable solutions to enhance decentralized applications and blockchain infrastructure. Mysten played a foundational role in designing and launching the Sui network. The Company continues to contribute to SUI’s technical advancements while fostering an ecosystem of developers, enterprises, and users who leverage its cutting-edge infrastructure. Mysten operates as a private technology company and is distinct from the Sui Foundation, which oversees governance, community funding, and decentralization efforts for the Sui network. While Mysten remains a significant contributor, the long-term evolution of SUI is guided by decentralized governance mechanisms and community participation.
Summary of a SUI Transaction
The following is a summary of a payment transaction of SUI on the Sui network.
Prior to engaging in SUI transactions directly on the Sui network, users generally must first install on their computer or mobile device a Sui network software program that will allow the user to generate a private and public key pair associated with a SUI address. The Sui network software program and the SUI address also enable the user to connect to the Sui network and transfer SUI to, and receive SUI from, other users.
Each Sui network address, or wallet, is associated with a unique “public key” and “private key” pair. To receive SUI, the SUI recipient must provide its public key to the party initiating the transfer. This activity is analogous to a recipient for a transaction in U.S. dollars providing a routing address in wire instructions to the payor so that cash may be wired to the recipient’s account. The payor approves the transfer to the address provided by the recipient by “signing” a transaction that consists of the recipient’s public key with the private key of the address from where the payor is transferring the SUI. The recipient, however, does not make public or provide to the sender its related private key. Wallets used to store cryptographic keys can be “hot” or “cold.” A hot wallet is connected to the internet, and is thus readily available to facilitate trading, but may be more vulnerable to hacking. A cold wallet is a wallet that stores cryptographic keys offline, such as on a computer that has no internet access, a segregated piece of hardware, or a piece of paper.
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Neither the recipient nor the sender reveal their private keys in a transaction, because the private key authorizes transfer of the funds in that address to other users. Therefore, if a user loses his or her private key, the user may permanently lose access to the SUI contained in the associated address. Likewise, SUI is irretrievably lost if the private key associated with them is deleted and no backup has been made. When sending SUI, a user’s Sui network software program must validate the transaction with the associated private key. In addition, since every computation on the Sui network requires processing power, there is a transaction fee involved with the transfer that is paid by the payor. The resulting digitally validated transaction is sent by the user’s Sui network software program to the Sui network validators to allow transaction confirmation.
Sui network validators record and confirm transactions when they validate and add blocks of information to the Sui blockchain. When a validator validates transactions, it creates a block, which includes data relating to (i) the verification of newly submitted and accepted transactions and (ii) a reference to transactions prior to the transactions is being added. The validator becomes aware of outstanding, unrecorded transactions through the data packet transmission and distribution discussed above.
Upon the addition of a block of SUI transactions, the Sui network software program of both the spending party and the receiving party will show confirmation of the transaction on the Sui blockchain and reflect an adjustment to the SUI balance in each party’s Sui network public key, completing the SUI transaction. Once a transaction is confirmed on the Sui blockchain, it is irreversible.
Some SUI transactions are conducted “off-blockchain” and are therefore not recorded in the Sui blockchain. These “off-blockchain transactions” involve the transfer of control over, or ownership of, a specific digital wallet holding SUI or the reallocation of ownership of certain SUI in a pooled-ownership digital wallet, such as a digital wallet owned by a Digital Asset Trading Platform. In contrast to on-blockchain transactions, which are publicly recorded on the Sui blockchain, information and data regarding off-blockchain transactions are generally not publicly available. Therefore, off-blockchain transactions are not truly Sui transactions in that they do not involve the transfer of transaction data on the Sui network and do not reflect a movement of Sui between addresses recorded on the Sui network’s blockchain. For these reasons, off-blockchain transactions are subject to risks as any such transfer of SUI ownership is not protected by the protocol behind the Sui network or recorded in, and validated through, the blockchain mechanism.
SUI Markets and Exchanges
SUI can be transferred in direct peer-to-peer transactions through the direct sending of SUI over the Sui network from one Sui network address to another.
SUI can be used as a means to conduct cross-border payments and to pay other users of the Sui network for goods and services under what resembles a barter system. Consumers can also pay merchants and other commercial businesses for goods or services through direct peer-to-peer transactions on the Sui network or through third-party service providers.
In addition to using SUI to engage in cross-border transactions or payment for goods and services, investors may purchase and sell SUI to speculate as to the price of SUI in the SUI market, or as a long-term investment to diversify their portfolio. The price of SUI within the market is determined, in part, by the supply of and demand for SUI in the global SUI market, market expectations for the adoption of SUI as a store of value or as a viable cross-border payments facilitator, the number of merchants that accept SUI, the regulatory challenges faced by SUI, and the volume of peer-to-peer transactions, among other factors.
SUI spot markets typically permit investors to open accounts with the market and then purchase and sell SUI via websites or through mobile applications. Prices for trades on SUI spot markets are typically reported publicly. An investor opening a trading account on a digital asset trading platform must deposit an accepted government-issued currency into its account with the trading platform, or a previously acquired digital asset, before they can purchase or sell assets on the trading platform. The process of establishing an account with a digital asset trading platform and trading SUI is different from, and should not be confused with, the process of users sending SUI from one SUI address to another SUI address on the Sui network. This latter process is an activity that occurs on the Sui network, while the former is an activity that occurs entirely within the order book operated by the digital asset trading platform. The digital asset trading platform typically records the investor’s ownership of SUI in its internal books and records, rather than on the Sui network. The digital asset trading platform ordinarily does not transfer SUI to the investor on the Sui network unless the investor makes a request to the exchange to withdraw the SUI in its platform trading account to an off-platform SUI wallet.
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The SUI market is largely institutional in nature, and SUI market participants generally consist of institutional entities, such as firms that offer two-sided liquidity for SUI, investment managers, proprietary trading firms, high-net-worth individuals that trade SUI on a proprietary basis, entities with sizeable SUI holdings, and family offices. The SUI market provides a relatively flexible market in terms of quotes, price, quantity, and other factors, although it tends to involve large blocks of SUI. The SUI market has no formal structure and no open-outcry meeting place. Parties engaging in “OTC” transactions will agree upon a price — often via phone or email — and then one of the two parties will then initiate the transaction. For example, a seller of SUI could initiate the transaction by sending the SUI to the buyer’s SUI address. The buyer would then wire U.S. dollars to the seller’s bank account. OTC trades are sometimes hedged and eventually settled with concomitant trades on digital asset trading platforms.
SUI Token Circulation
Newly created SUI are generated through a process referred to as “staking” which occurs when an actor on the Sui network acquires SUI and then pledges that SUI as collateral. This collateral is then put at risk in exchange for the validator collecting rewards for services rendered to the Sui network in the process of forming consensus and adding blocks to the blockchain. When the recipient makes newly minted SUI available for sale, there can be downward pressure on the price of SUI as the new supply is introduced into the SUI market.
The Sui network contains several deflationary measures. The total number of SUI that can ever be created is capped at 10 billion, unless a hard fork of the Sui network’s protocol occurs, as described above. For as long as the supply of SUI is capped, increased activity on the network has a deflationary effect as the Sui network’s Storage Fund grows in relation to the amount of data stored, which effectively takes more SUI out of circulation.
The Sui network’s supply of 10 billion SUI tokens is unlocked according to a distribution and unlock schedule designed to balance liquidity, stability, and long-term growth. The Sui “mainnet” launched on May 3, 2023 with a portion of the total supply made liquid at launch.
SUI Value
Digital asset trading platform valuations
The value of SUI is determined by the value that various market participants place on SUI through their transactions. The most common means of determining the value of a SUI is by surveying one or more digital asset trading platforms where SUI is traded publicly and transparently. Additionally, there may be OTC dealers or market makers that transact in SUI.
Digital asset trading platform public market data
On each online digital asset trading platform, SUI is traded with publicly disclosed valuations for each executed trade, measured by one or more fiat currencies such as the U.S. dollar or euro or by the widely used cryptocurrencies Bitcoin and Ethereum. OTC dealers or market makers do not typically disclose their trade data.
Forms of Attack Against the Sui Network
All networked systems are vulnerable to various kinds of attacks. As with any computer network, the Sui network contains certain vulnerabilities. The Sui network relies on a network of validator nodes that agree on the order and validity of transactions. These nodes form the backbone of the consensus process.
If the malicious actor cannot control the validator nodes directly, they might attempt to compromise the validators that are already trusted by the network. This could involve hacking, bribery, deception or coercion.
A malicious actor could also conduct an “eclipse attack.” In an eclipse attack, a malicious actor could isolate parts of the network so that the malicious actor’s nodes can influence the consensus in isolated sections of the network, eventually leading to a split or takeover.
This is not intended as an exhaustive list of all forms of attack against the Sui network. For additional information, see “Risk Factors.”
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SUI Transaction Fees
In proof-of-stake blockchain networks, Gas Fees also contribute to incentivizing validators who maintain the ledger and ensure the integrity of the network. Gas Fees are a fundamental component of blockchain networks, serving as a mechanism to compensate validators for processing transactions and executing smart contracts. These fees are required to allocate computational resources efficiently, prevent spam, and maintain network security. Gas Fees vary based on factors such as network congestion, transaction complexity, and the execution of smart contracts. The structure of Gas Fees is typically designed to balance affordability for users while providing adequate incentives for validators to secure the network and process transactions promptly.
The Sui network splits Gas Fees into two parts: computational fees and storage fees. Computational fees cover the cost of processing transactions, set by validators each epoch through a reference price. Storage fees, paid upfront when creating or changing objects, go into a storage fund — a pool that compensates validators for keeping data on-chain long-term. If users delete unneeded data, they receive a rebate from this storage fund.
The Sui network employs a gas fee model that ensures predictable and efficient transaction processing while minimizing costs for users. Gas Fees in the Sui network are denominated in SUI and serve the following key functions:
Gas Fees in the Sui network are collected in SUI and are either distributed as validator rewards or utilized within network mechanisms to sustain long-term decentralization. As network adoption grows and demand for computational resources increases, the Gas Fee model is designed to dynamically adjust to maintain efficiency and accessibility.
Validators and Market Participants
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The Sui network has three main groups of stakeholders. First users of the Sui network who submit transactions to create, mutate, and transfer digital assets or interact with more sophisticated applications enabled by smart contracts, interoperability and composability. Second holders of SUI who have the option of staking their SUI to validators and participating in the proof of stake mechanism. Holders of SUI also have the right to participate in the governance of the Sui network. Third validators who manage transaction processing and execution on the Sui network. Validators earn rewards for processing operations. Users of the network hold their own SUI, which they can delegate to the validators of their choice as part of the validators’ stakes. In so doing, the validators reward users based on the amount of SUI they delegate. Users are free to withdraw their SUI or to change their selected validator when each epoch changes.
The Sui network has developed technology to process blocks at high speed. Blocks are made and processed by validators in roughly 24 hour time period called an epoch. Each Sui network validator maintains its own staking pool to track the amount of stake and to compound staking rewards. Validator pools operate together with a time series of exchange rates that are computed at the beginning of each epoch. These exchange rates determine the amount of SUI that each past SUI staker can withdraw in the future. Importantly, the exchange rates increase as more rewards are deposited into a staking pool and the longer an amount of SUI is deposited in a staking pool, the more rewards it will accrue.
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1. Investment and Speculative Sector
This sector includes the investment and trading activities of both private and professional investors and speculators. Historically, larger financial services institutions are publicly reported to have limited involvement in investment and trading in digital assets, although the participation landscape is beginning to change. Currently, there is relatively limited use of digital assets in the retail and commercial marketplace in comparison to relatively extensive use by speculators, and a significant portion of demand for digital assets is generated by speculators and investors seeking to profit from the short- or long-term holding of digital assets.
2. Retail Sector
The retail sector includes users transacting in direct peer-to-peer SUI activity through the direct sending of SUI over the Sui network. The retail sector also includes transactions in which consumers pay for goods or services from commercial or service businesses through direct transactions or third-party service providers, although the use of SUI as a means of payment is still developing and has not been accepted in the same manner as bitcoin because SUI has a generally different purpose than bitcoin.
3. Service Sector
This sector includes companies that provide a variety of services including the buying, selling, payment processing and storing of SUI. For buying and selling SUI, the exchanges maintained by Binance Holdings Ltd. (“Binance”) and Bybit Fintech Limited (“Bybit”) are some of the largest Digital Asset Trading Platforms by volume traded. For storing SUI, BitGo is a digital asset custodian that provides custodial accounts that store SUI for users. As the Sui network continues to grow in acceptance, it is anticipated that service providers will expand the currently available range of services and that additional parties will enter the service sector for the Sui network.
Regulation of SUI and Government Oversight
As digital assets have grown in both popularity and market size, the U.S. Congress and a number of U.S. federal and state agencies (including FinCEN, OFAC, the SEC, the CFTC, FINRA, the CFPB, the Department of Justice, the Department of Homeland Security, the Federal Bureau of Investigation, the IRS, the Office of the Comptroller of the Currency, the FDIC, the Federal Reserve and state financial institution and securities regulators) have been examining the operations of digital asset networks, digital asset users and the digital asset markets, with particular focus on the extent to which digital assets can be used to violate state or federal laws, including to launder the proceeds of illegal activities or fund criminal or terrorist enterprises and the safety and soundness and consumer protective safeguards of markets or other service-providers that hold, transfer, trade or exchange digital assets for users. Many of these state and federal agencies have issued consumer advisories regarding the risks posed by digital assets to investors.
Recent events, including, among others, the bankruptcy filings of FTX Trading Ltd. (“FTX”) and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis (as defined below), BlockFi and others, and other developments in the digital asset markets, have resulted in calls for heightened scrutiny and regulation of the digital asset industry, with a specific focus on intermediaries such as digital asset exchanges, platforms and custodians.
These events led to a significant increase in regulatory and enforcement scrutiny, including from the Department of Justice, the SEC, the CFTC, the White House, Congress and various state-level agencies and attorneys general. For example, in June 2023, the SEC brought charges against Binance and Coinbase, Inc. (“Coinbase”). In addition, in November 2023, the SEC brought similar charges against Kraken alleging that it operated as an unregistered securities exchange, brokerage and clearing agency. However, between February 2025 and May 2025, the SEC entered into court-approved joint stipulations to dismiss each of the charges. The SEC has also terminated its investigations or enforcement actions as to other digital asset market participants. Nevertheless, state-level agencies and attorneys general continue to focus on the cryptocurrency industry, and past charges from federal regulators and law enforcement have led to significant volatility in digital asset prices and markets, and any future enforcement actions are likely to have similar effects.
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Depending on the regulatory characterization of digital assets, the markets for digital assets in general, and the Company’s activities in particular, the Company’s business and SUI treasury strategy may be subject to regulation by one or more regulators in the United States and globally. Ongoing and future regulatory actions may alter, to a materially adverse extent, the nature of digital assets markets, the participation of industry participants, including service providers and financial institutions in these markets, and our ability to pursue our SUI treasury strategy.
In addition, federal and state agencies, and other countries have issued rules or guidance about the treatment of digital asset transactions or requirements for businesses engaged in digital asset activity. In January 2025, the SEC staff officially rescinded Staff Accounting Bulletin No. 121 and issued Staff Accounting Bulletin No. 122, reversing prior guidance on the accounting treatment of crypto asset safekeeping activities. Shortly thereafter, the SEC’s acting Chairman Mark T. Uyeda announced the SEC Crypto Task Force. The task force has the stated objective of developing a comprehensive and clear regulatory framework for cryptocurrency assets. The task force also seeks to establish a practical and achievable process for registration of digital assets and design clearly defined disclosure requirements and frameworks. Subsequently, SEC Commissioner Peirce announced a list of specific priorities to further that objective, which include pursuing final rules related to determining a digital asset’s security status and a revised path to registered offerings and listings for digital assets-based investment vehicles.
President Trump’s January 23, 2025, Executive Order, titled “Strengthening American Leadership in Digital Financial Technology” (the “2025 Executive Order”), aimed to reorient the federal government’s approach to digital assets. The 2025 Executive Order emphasized the importance of the digital asset industry to innovation and economic development and outlined policies to support the growth and use of digital assets, blockchain technology and related technologies. President Trump’s order also revoked former President Biden’s March 9, 2022, Executive Order, titled, “Responsible Development of Digital Assets” and the U.S. Department of Treasury’s July 7, 2022, “Framework for International Engagement of Digital Assets” and all policies, directives and guidance issued pursuant to those items produced by the previous administration. The 2025 Executive Order also established an interagency working group with a mandate to propose a regulatory framework governing the issuance and operation of digital assets. In July 2025, the working group released a report with the administration’s recommendations to Congress and various agencies. The report recommends that Congress codify the right to self-custody of digital assets, clarify the applicability of Bank Secrecy Act obligations with respect to digital asset service providers, grant the CFTC authority to regulate spot markets in non-security digital assets, prohibit the adoption of a central bank digital currency, and clarify tax laws relevant to digital assets. The report also recommends that agencies reevaluate existing guidance on digital asset activities, use existing authorities to enable the trading of digital assets at the federal level, embrace decentralized finance, launch or relaunch crypto innovation efforts, and promote U.S. private sector leadership in the responsible development of cross-border payments and financial markets technologies, among others.
On January 29, 2026, the SEC and CFTC held a joint event at CFTC headquarters to discuss harmonization between the two entities and their shared goal of cementing U.S. leadership in digital assets and crypto-linked markets. The SEC and CFTC both released several no-action letters, statements, and interpretive guidance related to digital assets in late 2025.
On July 31, 2025, SEC Chairman Paul Atkins announced, “Project Crypto,” a Commission-wide initiative to modernize securities rules for digital assets, reshore innovation in the United States, and implement the recommendations of the working group report. Chairman Atkins directed the SEC’s policy divisions to work with the SEC Crypto Task Force to draft “clear and simple rules of the road for crypto asset distributions, custody, and trading,” and the Commission and SEC staff will also consider using interpretive, exemptive, and other authorities with respect to digital asset markets. However, these initiatives are in their early stages, and the scope and form of the SEC’s future regulation of digital asset activity remain uncertain.
Several bills have also been introduced in Congress that propose to clarify or establish additional regulation and oversight of digital asset markets. For example, the Digital Asset Market Clarity Act of 2025 (the “CLARITY Act”) was passed by the House of Representatives in July 2025, which would, if enacted, regulate digital asset markets and digital asset trading platforms in the United States. Also in July 2025, the “GENIUS Act” became the first federal law regulating stablecoin issuance, custody and other related matters in the United States. It remains to be seen whether the CLARITY Act or other legislation will be enacted and, if so, the scope and substance of any resulting regulation of digital asset markets and digital asset trading platforms.
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Various foreign jurisdictions have, and may continue to adopt, laws, regulations or directives that affect the Sui network, the SUI markets, and their users, particularly SUI spot markets and service providers that fall within such jurisdictions’ regulatory scope. Foreign jurisdictions including Canada, Germany, Sweden and Switzerland have also approved exchange-traded SUI products.
The effect of any ongoing or future regulatory changes on digital asset markets, digital asset trading platforms and SUI is difficult to predict, but such changes may be substantial and materially adverse to the Company.
Portfolio Investment Business
Our SUI treasury initiative does not affect our commercial short-term non-bank lending and specialty finance business, which we refer to as our portfolio investment business. These operations remain fully active and continue to represent an ongoing component of the Company’s business.
We believe we are generally able to charge high interest for our specialty finance solutions because: (i) banks and other traditional providers of credit may have neither the expertise nor the infrastructure needed to evaluate creditworthiness and risks in a timeframe suitable for a potential borrower, preferring instead to process transactions and structures that present few novel issues or risks; and (ii) we will often be able to devote time and attention to transactions involving a smaller dollar amount than an institutional lender will view as worthwhile. These beliefs essentially explain why we refer to our portfolio investment business as “specialty finance”— financing that may involve structures that are unique, creative, and often bespoke; and that may involve dollar amounts that are not suitable for institutional lenders.
We generally seek to provide specialty finance solutions that are short-term in nature. By this, we mean lending arrangements that mature or come due within nine months of the lending date. We view the provision of short-term finance as desirable for two principal reasons: (i) it helps minimize the risk of non-performance; and (ii) it helps minimize regulatory risk.
In terms of non-performance risk, short-term lending requires us to focus upon, and a potential borrower to identify to us, a near-term source of liquidity for repayment of the funds they borrow from us. This permits us to evaluate that source of repayment clearly and carefully, thus helping identify the potential risks involved in a particular transaction and how we may be able to include structural terms, such as specific collateral and collateral-related arrangements, guarantees, or other types of covenants or arrangements that mitigate those risks.
Examples of the kinds of the specialty finance solutions we have considered or provided to date, and may continue to provide in the future, include:
· Short-term secured loans for real estate development;
· Short-term secured loans to a business for operating capital; and
· Short-term secured loans to an individual owed a forthcoming tax refund
In addition, we occasionally explore and evaluate our ability to enter into other kinds of short-term specialty finance transactions. Examples include the expansion of our efforts to purchase adjudicated settlements, the purchase (at discounted rates) of receivables owing to professionals on account of certain workers’ compensation claim, and short-term consumer finance lending.
Sourcing Transactions
We believe that our management’s strong combination of experience and contacts in the securities and investment finance sector should be sufficient to continue attracting suitable prospective investment opportunities. To date, the network of contacts of our management and directors has been successful in sourcing all of the transactions in which we have participated. Accordingly, we presently do not have any plans to hire any business development professionals to assist us with transactional volume.
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Our Investment Process
We have identified several criteria that we believe are important general guidelines for us to meet our financial objectives. These criteria are, however, only general guidelines for our investment decisions and, in the case of some transactions in which we invest, fewer than all—or even none—of these criteria will be met.
If we believe a potential transaction generally meets the characteristics described above or if we otherwise determine that a potential transaction may be desirable to enter into, we may perform a more rigorous due diligence examination of the prospective borrower, the likely source or sources of liquidity for their repayment to us, and other aspects of the borrower or its assets (e.g., assets of the borrower that may serve as collateral security for the obligations that may be owing to us). Our due diligence examination for each transaction will necessarily be unique and tailored to the specific transaction, but will generally be undertaken in light of the following facts and circumstances:
· the dollar amount involved in the potential transaction;
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The assessments described above outline our general approach for our investment decisions, although not all of such activities will be followed in each instance, or some may be stressed more so than others depending on facts and circumstances. Upon successful completion of this preliminary evaluation, we will typically (1) evaluate our own regulatory concerns (i.e., to what extent the potential transaction may properly be considered an investment in a “security” for purposes of the 1940 Act and, if necessary, consider alternative structures to alleviate any risks to our company relating thereto), and (2) decide whether to move forward towards negotiating a letter of intent and, thereafter, definitive documentation for our transaction. Depending on timing, we may not use a letter of intent and will instead proceed directly to definitive documentation.
As indicated above, to avoid becoming subject to the regulatory requirements of the 1940 Act, we monitor our investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) at least on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size—with “significance” largely based on the outcome of our most recent quarterly review. This review is generally undertaken by our Chief Financial Officer and may involve our outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
Other Matters
In general, we do not believe that we are dependent in any material way on any particular borrower, type of specialty finance transaction, or industry. At this time, however, we have invested $10 million in a particular borrower, Mustang (a provider of litigation finance), as a result of a potential strategic combination transaction that was ultimately abandoned in August 2024. The failure of this combination transaction to complete resulted in our need to restructure our loan to Mustang in a way that ensured the maximum collateral security we could reasonably obtain, consistent with prevailing market-based commercial lending terms, while acceding to the requirements of their Senior Lender in respect of a subordination and intercreditor agreement and an extension of the maturity date for our loan. See Risk Factor titled “Our $10 million in principal amount loan to Mustang is subordinated to Senior Lenders in right of payment, in respect of our exercise of rights and remedies, and in right of collateral, with the result that our investment portfolio will for the foreseeable future be highly concentrated in and dependent upon the operational and financing success of Mustang.”
Sometimes the types of transactions we engage in are governed by particular laws, regulations, or rules. For example, lending transactions in which high-net-worth individuals (as opposed to entities) are the borrower will nearly always involve state law usury limitations. Transactions in which we seek and obtain collateral as security for obligations owed to us involve legal issues arising under the Uniform Commercial Code or its various state law iterations. To date, we have not engaged in transactions that require us to obtain licensure or a permit prior to entering into the transaction, e.g., brokering transactions or engaging in licensed consumer finance activities.
Competition
SUI Treasury Management Business
We operate within a developing and increasingly competitive segment of the digital asset market, consisting of publicly traded digital asset treasury (“DAT”) companies whose business models provide investors with indirect exposure to digital assets through publicly traded equity securities. Comparable publicly traded DATs include entities such as MicroStrategy, SharpLink Gaming, Sol Strategies, Semler Scientific, and DeFi Development Corp., among others. Similar to these peers, we offer investors exposure to digital asset price movements—specifically, to the Sui blockchain ecosystem—through the purchase of the Company’s Common Stock rather than through direct token ownership.
Participants in this sector, including the Company, are expected to compete for access to capital, as each seeks to raise funds for potential increases in digital asset holdings. When we engage capital raising transactions, we compete for capital with, among others, ETPs, bitcoin miners, digital assets exchanges, other digital assets service providers, other companies that hold SUI or other digital assets, including as treasury reserve assets, private funds that invest in SUI and other digital assets, traditional financial firms that have entered the digital assets market, and other entities that pursue strategies to accumulate or gain exposure to SUI or other digital assets. An increase in the competition for sources of capital could adversely affect the availability and cost of financing for our SUI purchases and thereby adversely affect the market price of our listed securities. Our SUI focused treasury strategy may differ from the approaches taken by our peers with respect to target asset selection, expected return profile, risk characteristics, operating costs, portfolio transparency, and governance practices. We anticipate that our treasury model focused on SUI may be viewed as more nuanced relative to certain competitors, and we intend to mitigate this perception through a commitment to providing clear disclosures, enhanced operational transparency and robust governance oversight.
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We expect to encounter competition from several types of digital‐asset investment vehicles, each of which competes for investor capital and, in varying degrees, for related digital asset exposure:
As we continue to implement our SUI centered treasury strategy, we expect that competition from each of the foregoing categories will influence capital formation, investor demand, and relative market positioning. We will continue to evaluate these competitive dynamics as part of our ongoing strategic planning.
Portfolio Investment Business
The market for specialty finance is competitive, largely as a result of the participation of various types of professionally managed pooled investment funds such as private equity and private credit funds, including secured, non-secured debt and mezzanine-debt funds, and other types of professional finance companies seeking the high returns that are possible in specialty finance and hard-money lending. Nevertheless, we believe we are well positioned to compete successfully in this market because of our entrepreneurial, creative and flexible approach to specialty finance opportunities, and our management’s experience in entrepreneurial ventures and finance.
Throughout our history and in particular after ceasing to be a BDC, we have approached investment opportunities flexibly and creatively in terms of transactional structures and terms. In part, we are able to be flexible and creative because we are not subject to many of the regulatory restrictions that govern our other more traditional or institutional competitors. Those competitors are often subject to limitations on the type transactions they undertake, the amount that may be invested in a specific transaction or a particular type of transaction, the markets in which they operate, the maturity or time horizon of their investment, uses of proceeds, or otherwise. These limitations are often imposed by the agreements and documents governing the pooled investment vehicles, or otherwise self-imposed in order to facilitate the investment vetting and due-diligence process, and the documentation and structuring process. More rarely, these limitations may arise from governing regulations or interpretations thereof. For our part, we believe that approaching investment opportunities flexibly expands our overall transactional opportunities, diversifies our risk by avoiding dependence in any material way on a particular borrower, type of transaction, or market or industry niche, and permits us to avail ourselves of the maximum number of relationships from which we source investment opportunities. Moreover, we believe that this flexible approach to structuring our transactions and investments will facilitate the development of positive long-term relationships with our borrowers.
We believe that the only significant limitation on our ability to flexibly structure transactions arises from our desire to remain outside the regulation of the 1940 Act. In order to meet this goal, we intend and aim to structure the vast majority of our transactions (by dollar amount) in ways such that they are not properly considered “securities” under federal securities laws, including the 1940 Act.
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For our investors, the freedom afforded to us through the lack of substantive regulation governing the types of transactions we enter into and our methods of operation permits us to allocate our resources, at any given point in time, to those types of transactions that we believe may lead to the highest risk-adjusted returns or the steadiest stream of such returns.
Our management team and Board have significant experience in a variety of entrepreneurial ventures, including service as management and directors for small public companies, private businesses, start-up and development-stage businesses, and the securities and finance industries. As a result of this diverse general experience and particular experience in transactional finance, we believe we are able to manage the evaluation and due-diligence process involved in our investment opportunities swiftly and efficiently, by collaborating with our professional advisers and focusing on high-level and material issues.
Intellectual Property
On July 31, 2025, the Company entered into a trademark license agreement with the Sui Foundation (the “Trademark Agreement”) granting the Company a limited, revocable, non-exclusive, fully paid-up, non-transferable and non-sublicenseable right and license to use and display the marks listed therein. The term of the Trademark Agreement is for one year with the ability for the Company to renew for successive one-year terms provided the Company has not sold $10,000,000 in SUI or other digital assets that utilize the Siu Protocols as their coordination layer, Bitcoin and any other cryptocurrencies (as may be approved by the Board) solely for the purpose of integrating Bitcoin and/or such other cryptocurrencies with the Sui Protocols.
Other than as described above, we do not own or use through license any other patents, trademarks, or other intellectual properties and we do not believe that any such assets would be material to our business.
Human Capital Management
We believe that being able to attract and retain top talent is both a strategic advantage for us and necessary to realize our business objectives. Currently, Douglas M. Polinsky, the Chief Executive Officer and a director of the Company, and Joseph A. Geraci, II, our Chief Financial Officer, and Stephen Mackintosh, who serves as our Chief Investment Officer but does not currently have a direct employment agreement with the Company, serve as our senior management team. Mr. Geraci resigned as a director of the Company effective January 5, 2026. These are also the only two persons employed by our company that have a management role. There are three persons in total employed by our company, each on a full-time basis.
Principal Executive Offices and Internet Address
Our principal executive offices are located at 1907 Wayzata Blvd, Suite 205, Wayzata, Minnesota, and our telephone number is (952) 479-1923. Our website address is https://suig.io/. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act are made available through our website, free of charge, as soon as reasonably practical after we electronically file or furnish the reports to the SEC. Also available on the Company’s website are the Company’s Code of Conduct and Ethics (“Code of Ethics”), as well as the charters of the audit and compensation committees of the Board. Information on our website or any other website is not incorporated by reference into the Annual Report and does not constitute a part of this Annual Report. Any amendments to the Code of Ethics, or any waivers of its requirements for which disclosure is required will be disclosed on our website.
The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
ITEM 1A RISK FACTORS
You should consider the following risk factors, in addition to the other information presented or incorporated by reference into this Annual Report, in evaluating our business and any investment decision relating to our securities.
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Risks Related to Our SUI Treasury Strategy
Our financial results and the market price of our Common Stock may be affected by the price of SUI.
As part of our capital allocation strategy for assets that are not required to provide working capital for our ongoing operations, we have invested and will continue to invest in SUI. As of February 23, 2026, we held an aggregate of 105,407,044 SUI and loan receivables of 2,961,550 SUI, which we acquired for an aggregate purchase price of approximately $386.5 million, exclusive of fees and expenses, at an average price of $3.56 per SUI. With 80,896,554 million fully adjusted shares issued and outstanding (including unexercised Pre-Funded Warrants) as of February 23, 2026, the Company has grown to approximately 1.34 SUI per share of Common Stock, or $1.17 per share of Common Stock. Our SUI holding (including SUI loan receivables) represents approximately 88.8% of our digital asset holdings, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins approximately 9.4%. The price of SUI has historically been subject to dramatic price fluctuations and is highly volatile. SUI is a highly volatile asset that has traded between $4.33 and $0.85 per SUI on Coinbase in the 12 months preceding February 23, 2026. More recently, during the fourth calendar quarter of 2025, SUI traded between approximately $3.62 and $1.35 per SUI. Moreover, digital assets, such as SUI, are relatively novel. SUI’s initial coin offering took place on April 20, 2023, and Sui’s Mainnet (blockchain protocol) was launched on May 3, 2023. The application of securities laws and other regulations to such assets is unclear in many respects. It is possible that regulators may interpret laws in a manner that adversely affects the liquidity or value of SUI.
Any decrease in the fair value of SUI below our carrying value for such assets could require us to incur a loss due to the decrease in fair market value, and such charge could be material to our financial results for the applicable reporting period, which may create significant volatility in our reported earnings. Any decrease in reported earnings or increased volatility of such earnings could have a material adverse effect on the market price of our Common Stock. In addition, the application of generally accepted accounting principles in the United States, with respect to SUI, may change in the future and could have a material adverse effect on our financial results and the market price of our Common Stock.
In addition, if investors view the value of our Common Stock as dependent upon or linked to the value or change in the value of our SUI holdings, the price of SUI may significantly influence the market price of our Common Stock.
Our SUI treasury strategy has not been tested over an extended period of time or under different market conditions.
We recently undertook a strategic shift and launched the SUI treasury strategy. We are continually examining the risks and rewards of our strategy to acquire and hold SUI. This strategy has not been tested over an extended period of time or under different market conditions. If SUI prices were to decrease or our SUI treasury strategy otherwise proves unsuccessful, our financial condition, results of operations, and the market price of our Common Stock would be materially adversely impacted. Additionally, given that our SUI treasury business has been developed and pursued only for a few months prior to the Annual Report, investors have a relatively limited means to evaluate our performance, its evolution, and the likelihood of our future success.
The prices of digital currencies, including SUI, are highly volatile and may be influenced by regulatory, commercial, and technical factors that are highly uncertain, and fluctuations in the price of SUI are likely to influence our financial results and the market price of our Common Stock.
Fluctuations in the trading prices of digital assets are likely to impact our financial results and the market price of our Common Stock. Our financial results and the market price of our Common Stock and our business and financial condition could be negatively impacted if the price of SUI decreased substantially, including as a result of:
· decreased user and investor confidence in digital assets;
· negative publicity or events relating to digital assets;
· negative or unpredictable media or social media coverage of digital assets;
· changes in consumer preferences and the perceived value of digital assets;
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· national and international economic and political conditions.
The growth of the digital assets industry in general, and the use and acceptance of SUI in particular, as well as other digital assets, may also impact the price of our digital asset holdings and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of digital assets, and SUI in particular, may depend, for instance, on public familiarity with digital assets, ease of buying and accessing the digital assets, institutional and consumer demand for SUI, and the availability and popularity of alternatives to bitcoin. Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term or that such growth will lead to a growth of the adoption of SUI.
Because SUI has no physical existence beyond the record of transactions on their respective blockchains, a variety of technical factors related to the Sui blockchain could also impact the price of SUI. For example, malicious attacks by stakers, inadequate staking fees to incentivize validating of transactions, hard forks of the blockchain into multiple blockchains, and advances in digital computing, algebraic geometry and quantum computing could undercut the integrity of the blockchain and negatively affect the price of our digital asset holdings. The liquidity of SUI may also be reduced and damage to the public perception of SUI may occur, if financial institutions were to deny banking services to businesses that hold digital assets, provide digital asset-related services or accept digital assets as payment, which could also decrease the price of our digital asset holdings.
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. Extreme volatility in the future, including further decline in the trading prices of SUI, could have a material adverse effect on the Company.
The trading prices of many digital assets, including SUI, have experienced extreme volatility in recent periods and may continue to do so. For instance, there were steep increases in the value of certain digital assets over the course of 2021, and multiple market observers asserted that digital assets were experiencing a “bubble.” These increases were followed by steep drawdowns throughout 2022 in digital asset trading prices. SUI was launched in May 2023, and over the course of 2023 and 2024, prices of digital assets continued to exhibit extreme volatility. SUI reached a low price of $0.3639 in October 2023 and a high price of $5.34 on January 4, 2025. As of February 23, 2026, the price of SUI was $0.88 Like many digital assets, SUI surged in value in its initial trading period, but shortly thereafter saw a decline in price, including as a result of the broader sell-off in cryptocurrency markets following the events of October 10 (described below); the price continues to fluctuate.
Extreme volatility may persist. The digital asset markets may still be experiencing a bubble or may experience a bubble again in the future. For example, in the first half of 2022, each of Celsius Network, Voyager Digital Ltd., and Three Arrows Capital declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In November 2022, “FTX” one of the largest digital asset exchanges by volume at the time, halted customer withdrawals amid rumors of the company’s liquidity issues and likely insolvency, which were subsequently corroborated by its CEO. Shortly thereafter, FTX’s CEO resigned, and FTX and many of its affiliates filed for bankruptcy in the United States, while other affiliates have entered insolvency, liquidation, or similar proceedings around the globe, following which the U.S. Department of Justice brought criminal fraud and other charges, and the SEC and CFTC brought civil securities and commodities fraud charges, against certain of FTX’s and its affiliates’ senior executives, including its former CEO, who was found guilty of these criminal charges in November 2023. In addition, several other entities in the digital asset industry filed for bankruptcy following FTX’s bankruptcy filing, such as BlockFi Inc. and Genesis Global Capital, LLC (“Genesis”). In response to these events, the digital asset markets have experienced extreme price volatility and other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets. For example, after October 10, 2025, approximately $19 billion of leveraged positions unwound, exceeding even the FTX collapse in 2022. In 2025, within a few weeks, Bitcoin dropped from the low $120,000s into the low $100,000s and continued to drop further in 2026, while Ether and many smaller tokens suffered double‐digit percentage declines, with some altcoins briefly collapsing to near‐zero on thin order books. Data providers such as CoinGlass recorded more than 1.6 million traders liquidated and total futures open interest shrank by tens of billions of dollars in a day, underscoring how concentrated leverage and fragmented liquidity turned a sharp price move into the largest liquidation event in crypto’s history. These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices, including SUI, may continue to experience significant volatility or price declines, and confidence in the digital asset markets may be further undermined. In addition, regulatory and enforcement scrutiny has been significant, including from, among others, the U.S. Department of Justice, the SEC, the CFTC, the White House and Congress, as well as state regulators and authorities. It is not possible to predict all of the risks that regulatory enforcement may pose to the Company, its service providers or to the digital asset industry as a whole.
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The Sui network utilizes the Move programming language. The use of the Move programming language may make SUI more susceptible to volatility because Move is less widely known than more established programming languages, and developers’ lack of experience with Move could deter the adoption and development of SUI, leading to increased price volatility. Extreme volatility in the future, including further declines in the trading prices of SUI, could have a material adverse effect on the Company.
The value of SUI may be highly volatile and subject to fluctuations due to a number of factors.
Fluctuations in the price of SUI could adversely affect the Company. The market price of SUI may be highly volatile, and subject to a number of factors, including:
· An increase in the global SUI supply;
· Forks in the Sui network;
· An active derivatives market for SUI or for digital assets generally;
· The Company’s own acquisitions or dispositions of SUI.
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In addition, there is no assurance that SUI will maintain its value in the intermediate or long term. The value of SUI as represented by the price quoted on sites such as CoinGecko or by the Company’s principal market may also be subject to momentum pricing due to speculation regarding future appreciation in value, leading to greater volatility that could adversely affect the Company. Momentum pricing is typically associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for future appreciation in value, if any. The Company believes that momentum pricing of SUI has resulted, and may continue to result, in speculation regarding future appreciation in the price of SUI, inflating and making the price of SUI more volatile. As a result, SUI may be more likely to fluctuate in value due to changing investor confidence, which could impact future appreciation or depreciation in the pricing benchmark and could adversely affect the Company.
The concentration of our SUI holdings could enhance the risks inherent in our SUI treasury strategy.
As of February 23, 2026, we held an aggregate 105,407,044 SUI and loan receivable of 2,961,550 SUI, which represents approximately 88.8% of our digital asset holdings including SUI loan receivable, with the remainder being USDC stablecoins at approximately 1.8% and suiUSDe stablecoins at approximately 9.4%. Our significant concentration of SUI ownership creates risk that a large holder or consortium of SUI holders could obtain effective control over network governance and consensus mechanisms. If a single entity accumulates a sufficient percentage of total SUI tokens, it could potentially influence transaction validation, protocol upgrades, or fee structures, which might adversely impact other stakeholders or destabilize the network. Furthermore, concentration increases the risk of contentious hard forks, which have fragmented their communities and impacted asset values. For example, in 2017 a group within the Bitcoin community advocated for increasing the block size limit to allow for more transactions, which ultimately lead to the creation of Bitcoin Cash, which features a larger block size. Hard forks can trigger significant price fluctuations in both the original and new cryptocurrencies, because speculation and uncertainty surrounding the hard fork can lead to increased volatility, making it difficult for investors to predict price movements. Due to our concentration of SUI in our treasury strategy, any such occurrence could lead to volatility or a decrease in the market price of our Common Stock.
If we fail to implement our SUI business strategy or if our SUI treasury strategy is ineffective, our financial performance could be materially adversely affected.
Our future financial performance and success are dependent in large part upon the effectiveness of our new SUI strategy and our ability to implement our SUI treasury strategy successfully. Implementation of our SUI strategy will require effective management of our operational, financial, and human resources and will place significant demands on those resources. There are risks involved in pursuing our strategy, including those under the caption “Item 1A – Risk Factors -Risks Relating to Our SUI Treasury Strategy”. In addition to the risks set forth elsewhere in this Form 10-K, effectiveness of and the successful implementation of our SUI treasury strategy could also be affected by a number of factors beyond our control, such as increased competition, legal developments, government regulation, general economic conditions, increased operating costs or expenses, and changes in industry trends. We may decide to alter or discontinue certain aspects of our SUI treasury strategy at any time. If we are not able to implement our SUI treasury strategy successfully, our long-term growth and profitability may be adversely affected. Even if we are able to implement some or all of the initiatives of our SUI treasury strategy successfully, our operating results may not improve and could decline substantially.
Our SUI strategy exposes us to risk of non-performance by counterparties
Our SUI strategy exposes us to the risk of non-performance by counterparties, whether contractual or otherwise. Risk of non-performance includes inability or refusal of a counterparty to perform because of a deterioration in the counterparty’s financial condition and liquidity or for any other reason. For example, our execution partners, custodians, or other counterparties might fail to perform in accordance with the terms of our agreements with them, which could result in a loss of SUI, a loss of the opportunity to generate funds, or other losses.
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Custodial arrangements pose additional risks. Our primary counterparty risk with respect to our SUI is custodian performance obligations under the custody arrangement we have entered into. BitGo is the custodian for all of our SUI and could experience bankruptcy or insolvency. Although BitGo has an insurance policy supporting its cold wallets, the Company has not purchased any additional insurance cover, and BitGo is not FDIC-insured. FTX, a leading cryptocurrency exchange, filed for bankruptcy in November 2022 following an estimated $8 billion liquidity shortfall due to a surge of withdrawals from the exchange, forcing the exchange to halt customer withdrawals. A series of additional recent high-profile bankruptcies, closures, liquidations, regulatory enforcement actions and other events relating to companies operating in the digital asset industry, including the filings for bankruptcy protection by Three Arrows Capital, Celsius Network, Voyager Digital, and Genesis Global Capital, the closure or liquidation of certain financial institutions that provided lending and other services to the digital assets industry, including Signature Bank and Silvergate Bank, SEC enforcement actions against Coinbase, Binance Holdings Ltd. (since withdrawn), and Kraken, the placement of Prime Trust, LLC into receivership following a cease-and-desist order issued by Nevada’s Department of Business and Industry, and the filing and subsequent settlement of a civil fraud lawsuit by the New York Attorney General against Genesis Global Capital, its parent company Digital Currency Group, Inc., and former partner Gemini Trust Company have highlighted the perceived and actual counterparty risk applicable to digital asset ownership and trading. Although these bankruptcies, closures and liquidations have not resulted in any loss or misappropriation of our SUI, nor have such events adversely impacted our access to our SUI, legal precedent created in these bankruptcy and other proceedings may increase the risk of future rulings adverse to our interests in the event one or more of our current and future custodians becomes a debtor in a bankruptcy case or is the subject of other liquidation, insolvency or similar proceedings. If a similar bankruptcy event occurred for BitGo, there is a risk of partial or total loss of our SUI holdings and delays in asset recovery, which could materially impact financial condition and operations.
While our custodian is subject to regulatory regimes intended to protect customers in the event of a custodial bankruptcy, receivership or similar insolvency proceeding, no assurance can be provided that our custodially-held SUI will not become part of the custodian’s insolvency estate if our custodian enters bankruptcy, receivership or similar insolvency proceedings. Additionally, if we pursue any strategies to create income streams or otherwise generate funds using our SUI holdings, we would become subject to additional counterparty risks. Any significant non-performance by counterparties, including in particular the custodian with which we custody substantially all of our SUI, could have a material adverse effect on our business, prospects, financial condition, and operating results.
We intend to mitigate counterparty risks through various measures, including maintaining substantially all of our SUI with BitGo, a well known custodian, and negotiating contractual terms designed to confirm that our custodially‐held SUI remains our property and is not subject to claims of a custodian’s creditors. However, insolvency law related to the custodial holding of digital assets is still developing, and there is no guarantee that these measures would be upheld in an insolvency proceeding. If custodially‐held SUI were nevertheless deemed property of a custodian’s bankruptcy estate, we could be treated as a general unsecured creditor, which could restrict or prevent our ability to exercise ownership rights and could result in a partial or complete loss of the associated value. Even if we ultimately prevailed in asserting our ownership rights, access to our SUI could be delayed or otherwise impaired during the pendency of any insolvency proceeding. Any such outcome could materially adversely affect our financial condition and the market price of our Common Stock.
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Shareholders may not receive the benefits of any forks or airdrops.
In addition to forks, a digital asset may become subject to a similar occurrence known as an “airdrop.” In an airdrop, the promotors of a new digital asset announce to holders of another digital asset that such holders will be entitled to claim a certain amount of the new digital asset for free, based on the fact that they hold such other digital assets. Airdrops may be conducted by sending a token to the holders of set amounts of SUI. Alternatively, airdrops may involve a user being entitled to claim tokens on a decentralized application, second-layer network or entirely separate digital asset network. As such, a user entitled to receive airdrops may be required to take little or significant actions in order to receive such airdropped tokens. Shareholders may not receive the benefits of any forks, the Company may not choose, or be able, to participate in an airdrop, and the timing of receiving any benefits from a fork, airdrop or similar event is uncertain.
A right to receive any such benefit of a hard fork or airdrop is referred to as an “Incidental Right” and any digital asset acquired through an Incidental Right as “IR Assets.” There are likely to be operational, tax, securities law, regulatory, legal and practical issues that significantly limit, or prevent entirely, shareholders’ ability to realize a benefit, through their interests in the Company, from any such Incidental Rights or IR Assets.
The Company may choose to evaluate any such fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants and the Asset Manager. In determining whether to attempt to acquire and/or retain any Incidental Right or IR Asset, the Company expects to take into consideration whatever factors it deems relevant in their discretion, including, without limitation:
In determining whether the Incidental Right or IR Asset is, or may be, a security under federal securities laws, the Company takes into account a number of factors, including the definition of a “security” under Section 2(a)(1) of the Securities Act and Section 3(a)(10) of the Exchange Act, SEC v. W.J. Howey Co., 328 U.S. 293 (1946) and the case law interpreting it, as well as reports, orders, press releases, public statements and speeches by the SEC providing guidance on when a digital asset is a “security” for purposes of the federal securities laws.
The Company intends to evaluate each fork, airdrop or similar occurrence on a case-by-case basis in consultation with the Company’s legal advisors, tax consultants, and may decide to abandon any Incidental Rights or IR Asset resulting from a hard fork, airdrop or similar occurrence should the Board conclude, in its discretion, that such abandonment is in the best interests of the Company.
In the event that any forks or airdrops are in fact considered to be an asset of the Company at any point in time, notwithstanding the discussion above, the assets will be valued in a manner consistent with ASC-820, U.S. “GAAP”, and the identification of a principal market for the asset.
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Our SUI holdings and other digital asset holdings are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.
Historically, the cryptocurrency markets have been characterized by significant volatility in price, limited liquidity and trading volumes compared to sovereign currencies markets, relative anonymity, a developing regulatory landscape, potential susceptibility to market abuse and manipulation, compliance and internal control failures at exchanges, and various other risks inherent in its entirely electronic, virtual form and decentralized network. During times of market instability, we may not be able to sell our SUI and other digital assets at favorable prices or at all. Further, SUI and other digital assets we hold with our custodians and transact with our trade execution partners does not enjoy the same protections as those available to cash or securities deposited with or transacted by institutions subject to regulation by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. Additionally, almost all of our digital asset holdings are comprised of SUI and 99% of our SUI is being staked. The staking process is continuously adjusted in scale, in line with network and market conditions, with adjustments aimed to ensure the Company maintains sufficient liquidity for redemptions on any given business day but any such adjustments are subject to a one-day unbonding period. Finally, we may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered SUI or otherwise generate funds using our SUI holdings, including in particular during times of market instability or when the price of SUI has declined significantly. If we are unable to sell our SUI or other digital assets, enter into additional capital raising transactions using SUI or other digital assets as collateral, or otherwise generate funds using our SUI or other digital assets holdings, or if we are forced to sell our SUI or other digital assets at a significant loss, in order to meet our working capital requirements, our business and financial condition could be materially adversely impacted.
Exposure to market abuse and manipulation may affect the market price of SUI.
We are also exposed to market manipulation risks such as front-running and wash trading, which risk is enhanced due to the concentration of SUI in our treasury strategy. We have made significant investments in SUI, and plan to continue to do so in the future. Cryptocurrency markets, including those for SUI, may be susceptible to market abuse and manipulation, such as wash trading, coordinated pump-and-dump schemes, spoofing, and other forms of manipulative activity. Sophisticated traders or entities with privileged access to order flow may exploit weaknesses in exchange infrastructure to execute trades ahead of pending orders (front-running), artificially inflate trading volumes (wash trading), or otherwise distort the market price of SUI. Such activities can reduce market integrity and liquidity and create material volatility or losses for holders like us, which could create further risks to us as a result of our concentrated holding of SUI in our treasury strategy. If SUI is affected by these activities, we may experience substantial fluctuations in the fair value of its investment, which could negatively affect our financial condition, results of operations, and reputation. Further, regulatory oversight of cryptocurrency markets is evolving, and there is no assurance that existing or future regulations or market mechanisms will effectively deter or mitigate the impact of market manipulation. As a result, we remain exposed to additional risks and uncertainties relating to the price and liquidity of SUI, which may result in financial loss or impairment of value in its investment.
The failure, insolvency, or mismanagement of our custodians and trade execution partners may result in the partial or total loss of our SUI holdings, delays or failures in executing trades, or other disruptions to liquidity and access.
Our significant investment in SUI depends on third‐party custodians and trade execution partners for the safekeeping, transfer, and management of our digital assets. If any of these service providers were to experience financial distress, operational failure, insolvency, security breaches, or other forms of mismanagement, we could suffer partial or total loss of our SUI holdings, delays or failures in executing trades, or broader disruptions to liquidity and access.
The digital asset industry has experienced several high‐profile custodial and exchange failures. For example, in November 2022, FTX—a major global cryptocurrency exchange—filed for bankruptcy following an estimated $8 billion liquidity shortfall after a surge in customer withdrawals, resulting in the suspension of withdrawals. Public reports indicated that this collapse stemmed from operational mismanagement, including misuse of customer funds, inadequate financial controls, and overreliance on its proprietary FTT token. Events such as these highlight the operational, financial, and governance vulnerabilities that can exist within digital asset service providers.
Many custodians and trade execution partners operate in a rapidly evolving regulatory environment and may lack the robust risk management frameworks, compliance programs, and operational controls typically associated with traditional financial institutions. In addition, cyberattacks, fraud, system failures, and other security incidents affecting these providers could lead to loss of assets or prolonged service interruption.
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Although we rely on third‐party custodians—such as BitGo, the custodian of our SUI holdings—who we believe implement security measures aligned with industry best practices, there can be no assurance that these measures will be effective. As the size of our SUI holdings grows, we may become a more attractive target for malicious actors. If we or any of our custodians are unable to identify, mitigate, or prevent new or evolving security threats, our digital assets could be subject to theft, loss, destruction, or other compromise.
Any inability of our custodians or trade execution partners to safeguard our assets, maintain operational continuity, or perform in accordance with their obligations could materially adversely affect our financial condition, operating results, and reputation.
Internal control failures may occur at BitGo, or other cryptocurrency custodians or exchanges we may utilize in the future.
The security and accessibility of our SUI assets are, in part, dependent on the integrity and reliability of the cryptocurrency custodians and exchanges used to hold, trade, or manage SUI. We currently utilize BitGo as custodian to hold all of our SUI assets. BitGo is a digital asset security firm established in 2013. Many cryptocurrency custodians, including BitGo, are relatively new and unregulated, and may be subject to internal control failures, including inadequate cybersecurity measures, poor risk management practices, or operational errors. Such failures can lead to asset loss, theft, suspension or freezing of accounts, delays in executing trades, or compromised private information. If a custodian or exchange we utilize to hold our SUI experiences an internal control failure, we may suffer partial or total loss of our SUI holdings, incur financial losses, experience disruptions in liquidity, or face reputational harm. Further, the regulatory environment relating to internal controls at cryptocurrency custodians and exchanges remains uncertain and fragmented, increasing the risk of internal control failures. There can be no assurance that our SUI assets will not be affected by such incidents, and the occurrence of internal control failures could materially adversely impact our financial condition and results of operations.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our SUI, or if our private keys are lost or destroyed, or other similar circumstances or events occur, we may lose some or all of our SUI and our financial condition and results of operations could be materially adversely affected.
Substantially all of the SUI we own is held in custody accounts at BitGo, a well-known custodian. Security breaches and cyberattacks are of particular concern with respect to our SUI. SUI and other blockchain-based cryptocurrencies and the entities that provide services to participants in the SUI ecosystem have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. For example, in October 2021 it was reported that hackers exploited a flaw in the account recovery process and stole from the accounts of at least 6,000 customers of the Coinbase exchange, although the flaw was subsequently fixed and Coinbase reimbursed affected customers. Similarly, in November 2022, hackers exploited weaknesses in the security architecture of the FTX Trading digital asset exchange and reportedly stole over $400 million in digital assets from customers. A successful security breach or cyberattack could result in:
· harm to our reputation and brand;
Further, any actual or perceived data security breach or cybersecurity attack directed at other companies with digital assets or companies that operate digital asset networks, regardless of whether we are directly impacted, could lead to a general loss of confidence in the broader Sui ecosystem or in the use of the Sui network to conduct financial transactions, which could negatively impact us.
Attacks upon systems across a variety of industries, including industries related to SUI, are increasing in frequency, persistence, and sophistication, and, in many cases, are being conducted by sophisticated, well-funded and organized groups and individuals, including state actors. The techniques used to obtain unauthorized, improper or illegal access to systems and information (including personal data and digital assets), disable or degrade services, or sabotage systems are constantly evolving, may be difficult to detect quickly, and often are not recognized or detected until after they have been launched against a target. These attacks may occur on our systems or those of our third-party service providers or partners. We may experience breaches of our security measures due to human error, malfeasance, insider threats, system errors or vulnerabilities or other irregularities. In particular, we expect that unauthorized parties will attempt to gain access to our systems and facilities, as well as those of our partners and third-party service providers, through various means, such as hacking, social engineering, phishing and fraud. Threats can come from a variety of sources, including criminal hackers, hacktivists, state-sponsored intrusions, industrial espionage, and insiders. In addition, certain types of attacks could harm us even if our systems are left undisturbed. For example, certain threats are designed to remain dormant or undetectable, sometimes for extended periods of time, or until launched against a target and we may not be able to implement adequate preventative measures. Further, there has been an increase in such activities due to the increase in work-from-home arrangements. The risk of cyberattacks could also be increased by cyberwarfare in connection with the ongoing Russia-Ukraine and Israel-Hamas conflicts, or other future conflicts, including potential proliferation of malware into systems unrelated to such conflicts. Any future breach of our operations or those of others in the Sui industry, including third-party services on which we rely, could materially adversely affect our financial condition and results of operations.
We may require significant additional capital to expand our SUI treasury strategy; if we cannot raise such capital on acceptable terms, our business and share price may be adversely affected.
We may require or choose to seek additional financing to expand our SUI treasury strategy. We cannot be certain that such financing will be available on favorable or acceptable terms, if at all, and our ability to secure such capital may be significantly impacted by the valuation and inherent volatility of SUI. If we raise additional funds through the issuance of Common Stock, preferred stock, or other equity-linked securities, our existing stockholders will experience immediate and potentially significant dilution of their ownership and voting power. Furthermore, any issuance of debt or senior equity instruments could subject us to restrictive operational covenants and result in the subordination of the rights of our common stockholders to superior liquidation and dividend preferences. Our inability to raise additional capital on acceptable terms in the future may prevent us from executing our SUI treasury strategy or maintaining our competitive position, which could result in a material decrease in our stock price and the loss of all or part of your investment.
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We may be unable to enter into term loans or other capital raising transactions collateralized by our unencumbered SUI or otherwise generate funds using our SUI holdings, including in particular during times of market instability or when the price of SUI has declined significantly.
Although we do not currently intend to do so, the ability to access liquidity or raise additional capital through transactions such as term loans collateralized by our SUI holdings is subject to evolving market practices and regulatory frameworks. The digital asset lending and collateralization markets are relatively new, with limited standardized processes, fluctuating asset valuations, and a small pool of counterparties willing to accept SUI as collateral. There can be no assurance that we will be able to enter into term loans or other capital raising transactions using its SUI holdings on favorable terms, or at all. If we are not able to convert its SUI holdings into liquidity or use them as collateral for borrowing, its financial flexibility and ability to pursue growth opportunities, meet obligations, or respond to changing market conditions could be materially adversely affected.
We may be subject to regulatory developments related to cryptocurrency assets and cryptocurrency asset markets, which could adversely affect our business, financial condition, and results of operations.
As SUI and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, it is possible that regulators in the United States or foreign countries may interpret or apply existing laws and regulations in a manner that adversely affects the price of SUI. The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SUI or the ability of individuals or institutions such as us to own or transfer SUI.
The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of SUI or other forms of digital assets or the ability of individuals or institutions such as us to own or transfer SUI. For example, the U.S. executive branch, the SEC, the European Union’s Markets in Crypto Assets Regulation, among others have been active in recent years, and in the U.K., the Financial Services and Markets Act 2023, or FSMA 2023 became law. It is not possible to predict whether, or when, any of these developments will lead to Congress granting additional authorities to the SEC, “CFTC”, or other regulators, or whether, or when, any other federal, state or foreign legislative bodies will take any similar actions. It is also not possible to predict the nature of any such additional authorities, how additional legislation or regulatory oversight might impact the ability of digital asset markets to function or the willingness of financial and other institutions to continue to provide services to the digital assets industry, nor how any new regulations or changes to existing regulations might impact the value of digital assets generally. The consequences of increased regulation of digital assets and digital asset activities could adversely affect the market price of SUI we intend to own, and in turn adversely affect the market price of our Common Stock. See “Item 1Business – Regulation of SUI and Government Oversight” for additional information.
Moreover, the risks of us engaging in a SUI treasury strategy have created and could continue to create complications due to the lack of experience that third parties have with companies engaging in such a strategy, such as increased costs of director and officer liability insurance or the potential inability to obtain such coverage on acceptable terms in the future.
The growth of the digital assets industry in general, and the use and acceptance of SUI in particular, may also impact the price of SUI and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of SUI may depend on public familiarity with digital assets, ease of buying, accessing or gaining exposure to SUI, institutional demand for SUI as an investment asset, the participation of traditional financial institutions in the digital assets industry, and the availability and popularity of alternatives to SUI. Even if growth in SUI usage occurs in the near or medium-term, there is no assurance that SUI usage will continue to grow over the long-term.
The liquidity of SUI may also be impacted to the extent that changes in applicable laws and regulatory requirements negatively impact the ability of exchanges and trading venues to provide services for SUI and other digital assets.
Changes in the accounting treatment of our SUI holdings could have significant accounting impacts, including increasing the volatility of our results.
We have adopted Accounting Standards Update (“ASU”) 2023-08, which requires in-scope crypto assets to be measured at fair value each reporting period with change recognized in net income, and to be presented separately from other intangible assets. SUI tokens meet the scope criteria of ASU 2023-08; accordingly, our SUI holdings are measured at fair value through net income.
Given the price volatility of SUI, we expect the adoption of ASU 2023-08 to increase the volatility of our financial results and to affect the carrying value of our SUI on our balance sheet in future periods. Recognizing fair value changes in GAAP net income may have adverse tax consequences, depending on applicable tax rules.
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If we violate anti-money laundering or sanctions rules, we could be subject to regulatory enforcement action resulting in significant fines, which could materially adversely affect our financial performance.
While we maintain anti-money laundering (AML), know-your-customer (KYC), and other due diligence procedures to screen counterparties, these processes may not be foolproof. If a sanctioned entity or individual evades detection and we complete a transaction with such a party, we could be subject to regulatory and legal penalties, reputational damage, and the forced unwinding of affected transactions. In 2022, several major cryptocurrency companies faced significant reputational damage and incurred substantial costs for remediation efforts after their transactions were linked to sanctioned addresses by regulators like the Office of Foreign Assets Control (OFAC). On October 11, 2022, OFAC announced a more than $24.28 million settlement with Bittrex Inc., a cryptocurrency exchange. The settlement resolved 116,421 transactions with persons with an internet protocol (IP) address or physical address in the Crimea region of Ukraine, Cuba, Iran, Sudan and Syria that resulted in violations of multiple U.S. sanctions programs. If we enter into transactions involving our SUI holdings, there is risk over similar oversights, which could lead to significant fines from OFAC and impact our financial results.
Absent federal regulations, there is a possibility that SUI may be deemed to be a “security.” Any classification of SUI as a “security” would subject us to additional regulation and could materially impact the operation of our business and financial conditions.
We believe that SUI is not a security, but neither the SEC nor any other U.S. federal or state regulator has publicly stated whether they agree with our assessment. Despite the Trump Administration’s Executive Order titled “Strengthening American Leadership in Digital Financial Technology” which includes as an objective, “protecting and promoting the ability of individual citizens and private sector entities alike to access and ... to maintain self-custody of digital assets,” SUI has not yet been classified with respect to U.S. federal securities laws. Therefore, while (for the reasons discussed below) we have concluded that the SEC is not likely to classify SUI as a “security” within the meaning of the U.S. federal securities laws, and so registration of the Company under the 1940 Act is therefore not required under the applicable securities laws, we acknowledge that a regulatory body or federal court may determine otherwise. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a determination by the SEC that SUI is a “security” requiring us to register as an investment company under the 1940 Act.
We have adapted our process for analyzing the U.S. federal securities law status of SUI and other cryptocurrencies over time, as guidance and case law have evolved. As part of our U.S. federal securities law analysis, we take into account a number of factors, including the various definitions of “security” under U.S. federal securities laws and federal court decisions interpreting the elements of these definitions, such as the U.S. Supreme Court’s decisions in the Howey and Reves cases, as well as court rulings, reports, orders, press releases, public statements, and speeches by the SEC Commissioners and SEC Staff providing guidance on when a digital asset or a transaction to which a digital asset may relate may be deemed a security by the SEC for purposes of U.S. federal securities laws. Our position that we believe the SEC would not view SUI as a “security” is premised, among other reasons, on our conclusion SUI does not meet the elements of the Howey test. Among the reasons for our conclusion that SUI is not a security is that holders of SUI do not have a reasonable expectation of profits from our efforts or the efforts of the Sui Foundation or any other enterprise in respect of their holding of SUI. Also, SUI ownership does not convey the right to receive any interest, rewards, or other returns.
We acknowledge, however, that the SEC, a federal court or another relevant regulatory entity with jurisdiction or other enforceable authority over us could take a different view. Application of securities laws to the specific facts and circumstances of digital assets is complex and subject to change. Our conclusion, even if reasonable under the circumstances, would not preclude legal or regulatory action based on a finding that SUI, or any other digital asset we might hold, is a “security.” As such, we are at risk of enforcement proceedings against us, which could result in potential injunctions, cease-and-desist orders, fines, and penalties if SUI was determined to be a security by a regulatory body or a court. Such developments could subject us to fines, penalties, and other damages, and adversely affect our business, results of operations, financial condition, and prospects.
If we were deemed to be an investment company under the 1940 Act, applicable restrictions likely would make it impractical for us to continue segments of our business as currently contemplated.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an “investment company” if (i) it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting, or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding, or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, and cash items) on an unconsolidated basis. Rule 3a-1 under the 1940 Act generally provides that, notwithstanding the Section 3(a)(1)(C) test described in clause (ii) above, an entity will not be deemed to be an “investment company” for purposes of the 1940 Act if no more than 45% of the value of its assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, and cash items) consists of, and no more than 45% of its net income after taxes (for the past four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 under the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of such entity, and securities issued by qualifying companies that are controlled primarily by such entity. We do not believe that we are an “investment company” as such term is defined in either Section 3(a)(1)(A) or Section 3(a)(1)(C) of the 1940 Act.
A component of our business—our legacy finance business—focuses on providing short-term specialty finance solutions primarily to private businesses, micro- and small-cap public companies and high-net-worth individuals. To avoid becoming subject to regulation under the 1940 Act, we periodically monitor our investment holdings as a whole with a view towards ensuring that investments and other holdings which may be considered “investment securities” do not comprise more than 40% of our total assets. We undertake this analysis (1) on a quarterly basis and in connection with the review and preparation of our financial statements filed as part of our quarterly and annual reports with the SEC, and (2) at other times when we are considering how to structure a new transaction that is of a significant size — with “significance” largely based on the outcome of our most recent quarterly review. We do not currently believe that our legacy finance business will subject us to the 1940 Act, but this may change. This review is generally undertaken by our Chief Financial Officer and may involve outside legal counsel, in particular in a case where we are considering the structure of a potential new transaction.
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With respect to Section 3(a)(1)(A), following the launch of our SUI treasury strategy, an amount in excess of 40% of our total assets were used to acquire SUI. Since we believe SUI is not an investment security, we do not hold ourselves out as being engaged primarily, nor do we propose to engage primarily, in the business of investing, reinvesting, or trading in securities within the meaning of Section 3(a)(1)(A) of the 1940 Act.
With respect to Section 3(a)(1)(C), we believe we satisfy the elements of Rule 3a-1 and therefore are currently not deemed to be an investment company under, and we intend to conduct our operations such that we will not be deemed an investment company under, Section 3(a)(1)(C). We believe that we are not an investment company pursuant to Rule 3a-1 under the 1940 Act because no more than 45% of the value of the Company’s total assets (exclusive of U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, and cash items) consists of, and no more than 45% of the Company’s net income after taxes (for the last four fiscal quarters combined) is derived from, securities other than U.S. government securities, shares of registered money market funds under Rule 2a-7 of the 1940 Act, securities issued by employees’ securities companies, securities issued by qualifying majority owned subsidiaries of the Company, and securities issued by qualifying companies that are controlled primarily by the Company.
SUI and other digital assets, as well as new business models and transactions enabled by blockchain technologies, present novel interpretive questions under the 1940 Act. There is a risk that assets or arrangements that we have concluded are not securities could be deemed to be securities by the SEC or another authority for purposes of the 1940 Act, which would increase the percentage of securities held by us for 1940 Act purposes.
If we were deemed to be an investment company, Rule 3a-2 under the 1940 Act is a safe harbor that provides a one-year grace period for transient investment companies that have a bona fide intent to be engaged primarily, as soon as is reasonably possible (in any event by the termination of such one-year period), in a business other than that of investing, reinvesting, owning, holding, or trading in securities, with such intent evidenced by the company’s business activities and an appropriate resolution of its board of directors. The grace period is available not more than once every three years and runs from the earlier of (i) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets or (ii) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. Rule 3a-2 is a safe harbor and we may rely on any exemption or exclusion from investment company status available to us under the 1940 Act at any given time. Furthermore, reliance on Rule 3a-2, Section 3(a)(1)(C), or Rule 3a-1 could require us to take actions to dispose of securities, limit our ability to make certain investments or enter into joint ventures, or otherwise limit or change our service offerings and operations.
If we were to be deemed an investment company in the future, restrictions imposed by the 1940 Act — including limitations on our ability to issue different classes of stock and equity compensation to directors, officers, and employees and restrictions on management, operations, and transactions with affiliated persons — likely would make it impractical for us to continue our business as contemplated, and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
The recently enacted GENIUS Act creates a new federal regulatory framework for stablecoins in the United States, and its implementation could materially impact our investment in, issuance of and holding of stablecoins and compliance obligations.
We hold the stablecoin USDC, and on October 1, 2025, we launched a proprietary Sui-native synthetic dollar token, suiUSDe. We plan to make additional investments in stablecoins, including suiUSDe in the future. In July 2025, the United States enacted the GENIUS Act, which provides for the creation of the first comprehensive federal regime for the issuance, custody, and use of payment stablecoins. This law applies to key aspects of stablecoin programs, including state and federal licensing of issuers, reserve composition and management, redemption rights, disclosures, and ongoing regulatory supervision. While the GENIUS Act has been signed into law, it will not become effective until the earlier of January 18, 2027, or 120 days after the primary federal payment stablecoin regulators issue any final regulations implementing the GENIUS Act. The impact of these legal and regulatory changes will depend in part on how the GENIUS Act is implemented through rulemaking by U.S. regulators. Therefore, while a consistent federal framework could increase institutional and consumer confidence in stablecoins over time, the scope, timing, and substance of implementing the associated regulations and supervisory practices remain uncertain. There is no guarantee that USDC or suiUSDe will meet the criteria of the GENIUS Act, and compliance may require us to make changes to our holding of stablecoins or elements of the suiUSDe coin. These changes could increase our legal, compliance, operational, and technology costs or limit the types of stablecoins we may issue, hold or invest in and could have a material adverse effect on our business, results of operations, financial condition, and prospects.
The classification of any of our cryptocurrencies as a commodity could subject us to additional regulation by the CFTC, resulting in significant compliance costs or the cessation of certain activities.
Some digital cryptocurrency assets are classified as commodities under the Commodity Exchange Act and are subject to regulation by the CFTC. If our activities require CFTC registration, we may be required to comply with extensive regulatory obligations, which could result in significant costs and operational disruptions. Additionally, current and future legislative or regulatory developments, including new CFTC interpretations, could further impact how digital cryptocurrency assets and digital cryptocurrency asset derivatives are classified and traded. If SUI is regulated as a commodity, we may be required to register the Company as a commodity pool operator with the CFTC through the National Futures Association. Compliance with these additional regulatory requirements could result in substantial, non-recurring expenses, adversely affecting an investment in our Common Stock. If we choose not to comply with such regulations, we may be forced to cease our SUI treasury operations, or to cease holding USDC or issuing suiUSDe which could materially adversely impact our business, results of operations, financial condition, and shareholders.
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We face other risks related to our SUI treasury business model.
Our SUI treasury business model exposes us to various risks, including the following:
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Risks Related to Our Portfolio Investment
We may need to raise additional capital to fund our portfolio investment operations, and such capital may not be available to us in sufficient amounts or on acceptable terms.
For the time being, management believes that our current cash is sufficient to continue portfolio investment operations for the foreseeable future. Nevertheless, various future developments may cause us to seek or require additional financing. In addition, we may determine to seek additional financing in order to avail ourselves of additional opportunities to provide specialty finance solutions to borrowers. Alternatively, we may seek additional financing in the event that a material portion of our investments default, leaving us with diminished means to pay for our operations and continue making investments.
In any event, additional financing could be sought from a number of sources, including but not limited to sales of additional equity or debt securities, or loans from financial institutions or our affiliates. We cannot, however, be certain that any such financing will be available on terms favorable or acceptable to us if at all. If additional funds are raised by the issuance of our equity securities, such as through the issuance of stock, convertible securities, or the issuance and exercise of warrants, then the ownership interest of our existing shareholders will be diluted. If additional funds are raised by the issuance of debt or other equity instruments, we may become subject to certain operational limitations, and such securities may have rights senior to the rights of our common shareholders. If adequate funds are not available on acceptable terms, we may be unable to consummate acquisitions or investments desired by our management and Board.
If we are unable to maintain diverse and robust sources of capital, our growth prospects, business, financial condition and results of operations could be adversely affected.