The King of Death Spiral Financing: Riding the Bitcoin Wave to the Top of Japan's Capital Market

Writing by: Alice French, Bloomberg

Translated by: Saoirse, Foresight News

Within Tokyo’s tightly-knit financial circles, few can provoke as much controversy as Michael Lerch.

In the eyes of some, he is a white knight — this mysterious American investor who has rescued Japan’s struggling companies from the brink of bankruptcy. But in others’ view, he is a greedy hyena: a profit-driven hedge fund manager who preys on vulnerable companies in crisis for profit.

Across the Japanese capital market, Lerch is synonymous with death spiral financing. This is a lucrative yet highly controversial financing model. His boutique investment fund Evo is Japan’s largest buyer of floating strike warrant options. These niche financing tools are mainly aimed at small listed companies with tight cash flows. The contracts can quickly inject cash to sustain operations but also cause large-scale equity dilution, which is why this model has earned its pejorative nickname.

(Note: Floating strike warrants, commonly known as death spiral financing tools, have strike prices that dynamically adjust with stock prices, often leading to ongoing equity dilution and a vicious cycle of falling stock prices. Their rampant abuse in Japan stems from a lack of financing channels for small, poor-quality companies, exchange regulations forcing companies to seek survival, lax regulatory oversight, and monopolized financing supply by major institutions, forcing companies to accept high-risk contracts to maintain listing status.)

After graduating from Princeton University, Lerch moved to Japan in the 1990s. For many years, he kept a low profile, building his financial empire through arbitrage trading. All of this changed last year: the previously struggling hotel operator Metaplanet suddenly gained fame by investing over $2 billion in Bitcoin, nearly all of which was financed through warrants provided by Evo.

This frantic accumulation of Bitcoin drove Metaplanet’s stock price soaring, attracting retail investors, large institutions, and even the Trump family to participate, vividly demonstrating Lerch’s astonishing profitability.

According to data from Japan’s I-N Information Systems, a series of transactions between Evo and Metaplanet made 2025 the year with the highest issuance volume of floating strike warrants in Japan’s history. Last year, Lerch’s funds in Japan achieved over 1 trillion yen in such financial transactions (about $10k), accounting for more than 80% of the total market.

Japan’s floating strike warrant issuance hits record high

Evo’s transactions account for over 80% of last year’s market total

Note: The statistics include initial issuance prices and maximum fundraising amounts

Source: I-N Information Systems, Bloomberg

This boom continued into 2026. According to the fund’s official website, Evo has already signed equity financing agreements with at least 10 Japanese companies this year.

The surge in demand for Lerch’s financing services has also exposed widespread abuse of floating strike warrants in Japan. Coinciding with the Japanese government’s upgrade of tax-free investment plans and record numbers of retail investors flooding into the stock market, potential risks have increased. These warrants often involve issuing large quantities of new shares to third parties at low prices, continuously diluting the holdings of minority shareholders.

Sadakazu Osaki, chief researcher at Nomura Research Institute and a senior expert in Japanese equity capital markets, said: “These warrants are the last resort for underperforming companies to raise funds. This spiral trading can cause equity dilution and depress stock prices. If ordinary retail investors get caught up, they face huge risks.”

Evo’s impressive performance last year also brought Lerch, who had kept a low profile for years, into the public eye. He has always been secretive in his dealings, with only one interview given to Bloomberg in 2015. Last December, he reappeared in the news: a London court ruled that his Nevada-based Evolution Capital Management must pay over $5 million in disputed bonuses to a disgruntled former trader.

This report is based on interviews with more than 20 former employees, clients, and industry insiders familiar with Lerch’s business (most anonymized for privacy), combined with Japanese corporate financial reports, London court documents, and other judicial materials. All this information reveals the truth: with highly favorable cooperation terms and a resolute style, this once-unknown fund has become a sought-after financing partner for Tokyo companies.

Today, Lerch, who resides year-round at his lakeside home in Lake Tahoe, Nevada, and his Evolution Financial Group, refuse to comment on this report. The lawyers representing Evolution Capital in the London case also did not respond to interview requests.

Evo is Japan’s most popular partner for warrant-based financing

Major third-party recipients of stock warrants in 2025

Note: Based on issuance volume; due to rounding, percentages may not sum to 100

Source: I-N Information Systems

Lerch’s career began in Japan in 1994. That year, he joined Barings Bank to work in options trading, only to see the bank collapse months later due to rogue trader Nick Leeson’s misconduct.

From 1996, Lerch worked at Merrill Lynch, Crédit Agricole, and Lehman Brothers, honing his trading skills, and in 2002 founded Evolution Financial Group in Tokyo. Evo was the group’s first fund, financed by himself and close associates.

Andrew Jackson, who came to Japan in 1997, worked as a trader at Jefferies Tokyo in the early 2000s and is now head of Japanese equity strategies at Ortus Advisors. He recalled: “At that time, Japan was full of investment opportunities, and Evo was making a killing. Market regulation was lax, and all industry contacts were made in bars and social gatherings. Japan’s capital market was a wild jungle back then.”

Jackson said he had extensive dealings with Evolution Group. The firm became known for arbitrage profits from the huge bid-ask spreads in Japan’s stock market at the time.

Lerch, now around 55, has expanded Evolution Group into a cross-regional family office, with operations in Los Angeles, Hong Kong, and a foothold on Hawaii’s North Shore. According to London court records, the entire group has about 55 employees worldwide.

People close to him say his excellent networking skills are key to his business expansion. He is considered intelligent and shrewd, with a somewhat eccentric personality: in Japan’s conservative business environment, he prefers brightly colored suits, thick-rimmed glasses, and a conspicuous appearance. A 2023 YouTube video shows him wearing a bright yellow sweater, matching glasses, and a heavy pendant necklace, walking through his office, promoting the group’s participation in a Japan-U.S. youth leadership exchange program.

This is a screenshot of Michael Lerch from a 2023 YouTube video.

During university, Lerch was an American football player, and his elite school background helped boost his reputation in Tokyo. In the early days of the group, he prioritized hiring Ivy League graduates and incorporated “tiger” elements into many business names as a tribute to Princeton University’s mascot.

Over the years, Lerch has secured several major deals through his network:

In 2010, Evolution Capital Management acquired the now-dissolved Tokyo Apache professional basketball team;

In 2011, Evolution Japan Securities bought electronic covered warrant businesses from Goldman Sachs Japan, and seven years later, sold that business to Caica Digital Japan;

In 2022, the group announced it sold its self-developed electronic trading platform Tora (meaning “tiger” in Japanese) to the London Stock Exchange Group for $325 million.

But Lerch’s business path has not been smooth. Court documents from a London bonus dispute show that after the 2008 global financial crisis, under investor redemption pressure, his multi-strategy hedge fund launched in 2004 was forced to liquidate. At its peak, the fund managed about $1 billion.

Evo’s financing business centers on floating strike warrants, along with other tools like convertible bonds, rooted in Lerch’s decades of arbitrage experience. The fund’s Japanese website states that its advantage lies in tailoring solutions to corporate needs and making flexible, efficient investment decisions.

Since Japan’s recovery from the asset bubble burst in the early 2000s, floating strike warrants have become a standard tool in the Japanese equity capital market. These warrants give holders the right to buy company stock at a future date, with the strike price adjusting over time according to an agreed formula, usually based on the previous trading day’s closing price.

They are very similar to the market-based share issuance methods in U.S. markets, providing a quick, low-cost financing channel for companies that cannot obtain bank or large institutional credit.

When the strike price falls below the stock price, warrant holders will exercise and convert to shares, then sell for profit.

Osaki from Nomura Research Institute said: “Some believe this model is fraught with risks, but Evo’s logic is very simple: when all institutions refuse to lend to a company, it becomes the only lifeline.”

Shinhiro Nagasawa, president of the seafood restaurant chain Sanki Foods, has firsthand experience: “Without Evo, we might have shut down long ago.”

A seafood restaurant operated by Sanki Foods in Tokyo. Source: Sanki Foods

During the pandemic, Sanki Foods closed many stores and faced financial crisis, nearly delisted in early 2020. Around 2022, Evo’s staff proactively visited their stall at the Numazu Fish Market south of Tokyo to promote financing services. Soon after, Nagasawa met Lerch and reached a financing agreement with Evo.

In an interview at a Tokyo izakaya, Nagasawa said: “There’s no denying these warrants suppressed our stock price and caused short-term losses for existing shareholders. But the funds saved the company, and it was all worth it. I am very grateful to Evo.”

Evo’s financing suppressed Sanki Foods’ stock price

Sanki Foods signed its first deal with Evo Fund in December 2022

Note: Data standardized to the percentage change as of January 4, 2022

Source: Bloomberg; Sanki Foods disclosures

In stark contrast, Shingo Kameida, president of the investment firm Mankai Investment Corporation, said: “Our company’s reputation is still being repaired after working with Evo in 2023.”

“That financing severely damaged our image,” Kameida admitted. The company was already in decline before working with Evo. They did not actively seek Evo’s financing but had no choice but to sign a fixed strike warrant agreement without fully understanding the risks.

Before working with Evo, their stock was already trending downward. Evo repeatedly exercised warrants below market price, further depressing the stock and causing strong dissatisfaction among existing shareholders. “Evo’s contract design guaranteed they’d make a profit from the start.”

Evo’s official website claims that the fund offers flexible solutions, full support throughout the financing process, and proactive communication with Japanese companies.

Kameida, CEO of Mankai Investment

Metaplanet’s president Simon Gerovich said Evo’s highly competitive terms make it Japan’s top warrant financing partner. After many hotels under Metaplanet shut down during the pandemic, in early 2025, they signed a floating strike warrant agreement with Evo to raise funds for large Bitcoin purchases.

“Compared to other institutions, Evo’s terms are unmatched,” Gerovich said. Other potential investors typically charge an 8-10% strike premium, but Evo promises no discount fees at exercise.

Evo’s high exercise efficiency allows Metaplanet to raise funds rapidly. Evo also signed a stock lending agreement with Gerovich’s investment firm (a major shareholder of Metaplanet), completing position hedging before each transaction to accelerate exercise.

Last year, Gerovich publicly thanked Lerch on social platform X for his support of Metaplanet.

An industry insider who previously worked at Evo said that the fund’s ability to offer generous terms relies on mature warrant arbitrage skills. The team’s traders have high risk tolerance, and Lerch often recruits talent at Tokyo’s social venues.

Evo’s large-scale warrant exercises with Metaplanet vividly demonstrate the enormous profit potential of this model. According to regulatory disclosures and Bloomberg estimates, on June 24, 2025, Evo acquired 54 million Metaplanet shares at a price nearly 10% below the closing price. Within a week, the fund sold 16% of those shares, earning 2.2 billion yen in profit.

Gerovich said: “Evo makes substantial profits, but it’s a win-win situation.” As of 2025, Metaplanet raised over 290 billion yen through warrants and holds more than 40k Bitcoin.

As Metaplanet continues to raise funds and accumulate Bitcoin, Evo’s warrant exercises keep diluting existing shareholders, many of whom hold shares through Japan’s tax-advantaged accounts. The June 24 exercise alone expanded Metaplanet’s total share capital by about 9%.

Gerovich explained: “In this business model, all shareholders’ equity gets diluted, but nobody minds because this dilution is benign — our Bitcoin assets are continuously appreciating.”

After a surge of over 2,000%, Metaplanet’s stock price has plummeted about 80% from its mid-June peak. Starting October 2025, Metaplanet sought alternative financing channels, and Evo ceased warrant exercises.

Even as Metaplanet’s stock price crashes, Evo continues to exercise MS (moving strike) warrants.

Metaplanet’s stock price has fallen about 80% from June’s peak.

Source: Metaplanet filings; Bloomberg

Japan Exchange Group (operator of the Tokyo Stock Exchange) declined to comment specifically on Evo’s business. Its official statement said that floating strike warrants issued to third parties are considered routine equity financing tools for listed companies.

The exchange also acknowledged concerns that such tools could harm shareholder interests through dilution and stock price declines, and has introduced regulatory measures such as setting monthly exercise limits. Listed companies can also mitigate dilution impacts by setting minimum exercise prices and lock-up provisions.

But Lerch’s aggressive, uncompromising approach has made many Japanese companies wary of working with him.

Alexey Shitov, a former executive at Evolution Group who handled Goldman Sachs’ warrant business in the 2010s, said: “Evo has always been known for its aggressive tactics. Since Evolution Group took over the business, our reputation among clients has noticeably changed.”

Regulatory records show that in early 2016, Evolution Group’s Cayman subsidiary Evo Investment Advisors was fined 9.2 million yen by Japan’s Financial Services Agency for manipulating the stock price of a Tokyo-listed company. The Securities and Exchange Surveillance Commission of Japan did not comment further.

In 2024, Evolution Japan Securities sued robot manufacturer Kuramoto Co. in Tokyo court, claiming 71 million yen for breach of warrant contracts and issuance to third parties.

Kuramoto’s president, Mamoru Komine, said: “Evo approached us proactively, but we ultimately rejected their warrant proposal. Even after the contract was terminated, they filed a lawsuit.” The case is still ongoing, and Kuramoto has provisioned the lawsuit as an estimated loss in its February financial report.

Several anonymous partners and former employees say Lerch can become very aggressive and irritable under pressure, with sudden dismissals of traders and emotional outbursts during negotiations.

A London labor dispute last year also revealed his tough, obsessive style. The court ruled that Evolution Capital Management unjustly withheld bonuses from former employee Robert Gagliardi, who generated most of the company’s revenue during his tenure. The firm claimed he was involved in U.S. market investigations damaging its reputation. Court documents show Lerch even insulted the employee in text messages.

Setting aside the controversies, Evo’s rise reflects the plight of Japan’s micro-listed companies: over 60% of listed firms are small caps. As the Tokyo Stock Exchange raises listing requirements, many companies urgently need financing, making balancing rapid fundraising with protecting retail shareholders’ interests a difficult challenge.

Yao Zhihua, associate professor of economics at Kitakyushu City University, said: “Floating strike warrants are a lifeline for underperforming companies; otherwise, it’s hard for them to attract investment. The market has mixed opinions on this tool, but Evo and Metaplanet’s high-profile cooperation will likely boost demand for such financing contracts across the market.”

For Shingo Kameida, president of Mankai Investment Corporation, the risks of harming shareholders outweigh the benefits of cooperation, and he is reluctant to partner with Evo again. In March this year, his firm chose Hong Kong hedge fund Long Corridor Asset Management for a new warrant financing deal, emphasizing the need to prioritize existing shareholders’ rights.

Kameida revealed that Evo still sends financing invitations, but he always declines. “In the eyes of different people, Lerch is both a savior and a vulture. These financing deals are always a double-edged sword.”

(This article was assisted by: Jonathan Browning, Bailey Lipschultz, Finbarr Flynn, Wu Jin)