The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are reportedly investigating suspicious trading patterns in the shares of certain companies that have announced crypto treasury strategies.
SEC, FINRA Scrutinize Suspicious Trading Moves
On Thursday, The Wall Street Journal (WSJ) reported that financial regulators have reached out to some of the over 200 companies with Digital Asset Treasury (DAT) strategies after observing unusual trading activity in the days leading up to the announcement of their crypto treasury strategy.
People familiar with the matter told the news media outlet that the SEC and the FINRA have examined unusual trading moves in the shares of multiple unnamed companies that announced that they would adopt a DAT strategy this year.
Reportedly, the regulators have raised concerns in letters and conversations about “unusually high trading volumes and sharp stock-price gains” that preceded the announcement that these companies would make cryptocurrencies their core corporate strategy.
SEC officials have warned these companies about potential violations of Regulation Fair Disclosure, the WSJ sources alleged. As the news media outlet noted, the rule prohibits public companies from “selectively disclosing material, nonpublic information to investors, analysts, and other market participants who might trade on the information.”
According to some lawyers, these types of FINRA letters usually mark the start of serious investigations into insider trading. However, it remains unclear whether the financial regulators are pursuing enforcement actions against any of these companies or investors.
Former SEC enforcement lawyer and now SEC defense attorney David Chase told WSJ that “when those go out, it really stirs the pot. It’s typically the first step in an investigation. Whether it goes full, full length, it’s anybody’s guess.”
The sources noted that, in some cases, the secrecy of the DAT announcements can be compromised, leading to the unusual stock activity ahead of the official statements. Meanwhile, lawyers who have worked on crypto-treasury deals affirmed that information leaks can also harm pricing transactions.
“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,” Justin Platt, a partner at law firm Goodwin, told WSJ.
Crypto DAT’s Momentum Continues
Over the past few months, the crypto treasury strategy trend, pioneered by Michael Saylor’s Strategy, has gained momentum, with 212 new companies announcing plans to raise hundreds of billions of dollars to launch DAT strategies, the WSJ noted, citing data from crypto advisory firm Architect Partners.
Throughout September, multiple companies have unveiled crypto treasury strategies focused on Cardano (ADA), Avalanche (AVAX), and Solana (SOL). As reported by Bitcoinist, Solana-focused DATs have seen hundreds of millions of dollars invested in the strategies this month.
Recently, Helius Medical Technology revealed the launch of a $500 million SOL treasury strategy backed by Pantera Capital and Summer Capital. Similarly, Nasdaq-listed Fitell Corporation, a global provider of fitness equipment and health solutions, has unveiled the launch of the first Solana-based digital asset treasury in Australia.
Meanwhile, the top crypto treasuries have continued to accumulate Bitcoin (BTC) and Ethereum (ETH), the leading digital assets. BitMine, the largest ETH-focused treasury, recently surpassed the 2 million ETH milestone, while Strategy, the leading Bitcoin and crypto treasury, purchased another 850 BTC earlier this week.
