SEC Taking a Hard Look at ‘Overnight’ Digital Currency Companies
Monday, the US Securities and Exchange Commission (SEC) made it known that it is taking a hard look at public companies that change their name and/or business model in a bid to capitalize upon the investor frenzy, and hyperbole surrounding blockchain technology,
SEC Chairman Jay Clayton said Monday, that dozens of little-known companies across the globe have seen their share prices leap in recent months after unveiling plans to enter the Bitcoin industry or that of its underlying distributed ledger blockchain technology.
Currently, Bitcoin is trading at: 10,400.0146, -1,332.48, or -11.36% at of 5:54a GMT, the market is open.
In December, the SEC temporarily suspended trading in the shares of Crypto Company (PKMKT:CRCW)), a small firm that saw its stock rise more than 2,700% after announcing that it inked a deal to buy a cryptocurrency data platform.
Chairman Clayton warned that it was not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures around the risks involved.
“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering,” he told a conference Monday.
The Chairman also said the SEC had seen “disturbing” evidence that legal professionals have been wrongly counseling clients that ICOs (initial coin offerings), whereby cryptocurrency start-ups solicit funds from investors who receive tokens in return, do not need to comply with federal securities law.
The SEC has said that such fundraising’s should comply with securities law and has warned investors more broadly over the risks of cryptocurrency fraudsters.
“I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the US securities bar,” the SEC Chairman Clayton said.