URGENT UPDATE: Federal regulators are intensifying their scrutiny of companies adopting crypto-treasury strategies, as unusual trading patterns raise alarms about potential insider trading. Just announced by the Wall Street Journal, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are probing several firms due to significant stock price surges prior to public announcements of cryptocurrency purchases.
The trend has skyrocketed this year, with 212 new companies reportedly planning to raise an astounding $102 billion for crypto investments. These strategies, pioneered by companies like Strategy (formerly known as MicroStrategy), involve leveraging stock or debt sales specifically to buy Bitcoin and other cryptocurrencies. This shift is no longer just an experiment; it has become a central focus for many firms.
For instance, Strategy, a company originally founded in 1989 as a business intelligence firm, made headlines in 2020 when it invested $250 million in Bitcoin. This past February, it officially dropped “Micro” from its name, signaling its full commitment to the crypto market.
Regulators have taken note of the “unusually high trading volumes” and sharp stock price increases that often precede announcements of these crypto acquisitions. According to insiders, SEC officials have warned companies that they may have violated the Regulation Fair Disclosure rule, which prohibits selective sharing of non-public information that could influence trading.
As reported, letters from FINRA often mark the beginning of formal investigations into potential insider trading. While the SEC has not yet commented on the situation, the implications could be significant for companies involved in these crypto-treasury strategies.
Many of these firms gauge interest from private investors willing to finance their crypto purchases, often requiring these investors to sign nondisclosure agreements. This lack of transparency raises concerns, especially as stock values surged in the days before announcements, hinting at possible leaks of sensitive information about these transactions.
The investigation comes at a time when SEC Chair Paul Atkins has criticized the commission’s past enforcement strategies, claiming that they have “weaponized” their approach to stifle the crypto industry. With the pro-crypto stance of the Trump administration, some analysts believe a lenient response from regulators may not be surprising.
As this story develops, stakeholders in the crypto market should stay vigilant. The future actions of the SEC and FINRA could reshape the landscape for companies pursuing crypto-treasury strategies. For now, investors and firms alike are left to wonder about the potential fallout from these investigations.
Stay tuned for further updates as this situation unfolds.