Peter Schiff, the economist and gold enthusiast who's never met a Bitcoin he liked, is taking his critique of Strategy (MSTR) to a new level. He's not just calling the Bitcoin treasury company's business model questionable—he's calling it outright fraud.

"MSTR's entire business model is a fraud," the Euro Pacific Asset Management global strategist declared Sunday on X, throwing down the gauntlet for a public debate with Strategy Chairman Michael Saylor. Schiff proposed the cryptocurrency conference Binance Blockchain Week in Dubai this December as the venue.

"Regardless of what happens to Bitcoin, I believe $MSTR will eventually go bankrupt," Schiff added, doubling down on his position.

The core of Schiff's argument centers on Strategy's increasing reliance on preferred shares to fund its Bitcoin buying spree. In a separate post, he argued that Strategy won't be able to pay the dividends on these preferred shares, which have become critical to the company's capital-raising strategy.

"Once fund managers realize this they'll dump the preferreds & $MSTR won't be able to issue any more, setting off a death spiral," Schiff warned.

Here's the background: Over the past five years, Strategy has built an entire business around issuing equity to accumulate Bitcoin. The pitch to shareholders is straightforward—maximize Bitcoin per share and serve as a proxy for investors who want exposure to the digital asset but can't or won't buy it directly.

But there's a problem. Strategy's premium to net asset value has collapsed, dropping from over 2.5 to less than 1 in the past year. When your stock trades at a premium to the Bitcoin you hold, issuing new shares to buy more Bitcoin is accretive to existing shareholders. When that premium shrinks or disappears, issuing common stock becomes dilutive. That's why the company pivoted to preferred shares.

The timing hasn't been ideal. The shift to preferreds has coincided with an explosion of copycat companies jumping into the Bitcoin treasury game. According to Bitcoin Treasuries, there are now 194 companies with Bitcoin on their balance sheets, all competing for investor attention.

Meanwhile, Bitcoin itself has been on a wild ride, plunging from a record high of $126,000 to as low as $89,000 on Tuesday. That volatility makes Strategy's funding strategy even more precarious.

Preferred shares allow Strategy to keep accumulating Bitcoin despite these headwinds, but they come with a catch—dividends. The company lacks significant cash flow from operations, which means paying dividends to existing preferred shareholders would essentially require raising capital from new investors. To some observers, that structure raises uncomfortable parallels to a Ponzi scheme.

As of Q3, Strategy was on the hook for nearly $700 million in annual dividend obligations. That's real money that needs to come from somewhere.

Saylor, for his part, expressed confidence during Strategy's Q2 earnings call in late July. "We wouldn't miss a single dividend payment on an 80% drawdown," he said, suggesting the company has planned for even severe Bitcoin price declines.

Whether Saylor will accept Schiff's debate challenge remains to be seen. It would certainly make for compelling theater—the Bitcoin maximalist versus the gold bug, live in Dubai.