More than 200 companies that claimed they were switching to a crypto-treasury strategy are now on the radar of U.S. regulators.
Both the Securities and Exchange Commission and the Financial Industry Regulatory Authority have contacted these companies after spotting sudden spikes in stock prices and trading activity just days before their public crypto announcements.
According to the Wall Street Journal, regulators saw a pattern: big trades, wild price jumps, and then—surprise—a company would come out and say they’re going all in on crypto. The SEC and FINRA are now digging to find out who knew what, and when.
In those contacts, the SEC reportedly warned companies about breaking Regulation Fair Disclosure, or Reg FD, which bans companies from leaking important, non-public news to people who might try to trade on it.
Regulators flag price jumps and leaked crypto deals
The Finra letters didn’t just say hello. According to legal experts, these types of letters usually kick off serious investigations. “When those go out, it really stirs the pot,” said David Chase, a former SEC enforcement lawyer who now defends clients in these cases. “It’s typically the first step in an investigation. Whether it goes full, full length, it’s anybody’s guess.”
Right now, it’s unclear if any actual enforcement actions are coming, or if any specific company or investor is already being targeted. But these letters alone are enough to make executives nervous.
The situation comes at a time when the SEC is trying to shift its tone with the crypto industry. In a recent speech, SEC Chairman Paul Atkins called out the old tactics, accusing the agency of having “weaponized” its enforcement division in the past to crack down on the industry. He promised the SEC will now focus on setting “clear, predictable rules.”
While that speech may have sounded like a peace offering, these new probes suggest the SEC isn’t putting its badge down anytime soon.
Companies rushed into crypto with $102B and shaky NDAs
The crypto-treasury trend exploded this year. According to Architect Partners, a firm that tracks the industry, 212 companies have announced plans to raise around $102 billion to buy bitcoin and other tokens.
The model they’re copying? Strategy, the company formerly known as MicroStrategy. They raise funds by selling stock or taking on debt, then use the cash to load up on crypto.
Before going public with their strategy, these companies usually talk to a few handpicked investors to see who’s interested in joining the deal. But there’s a catch. Those investors are expected to keep quiet by signing nondisclosure agreements. Problem is, those NDAs aren’t always airtight.
Several of the companies saw their stock prices shoot up before they made any announcements. That’s what triggered the SEC and FINRA attention. If someone leaked, and people traded on that info, it smells like insider trading.
And that leak doesn’t just break rules, it can wreck the deal. Justin Platt, a partner at law firm Goodwin, said, “If the stock price is highly volatile in the days leading up to pricing a transaction, that could actually make it very difficult to agree on a price for the transaction and put it at risk of execution.”
So now, what started as a rush into crypto could end up as a lesson in how not to fumble your treasury strategy while everyone’s watching.
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Source: https://www.cryptopolitan.com/sec-finra-probe-crypto-treasury-stock-spikes/
