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The US Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) are reportedly probing questionable trading patterns in the stocks of specific firms that have revealed crypto treasury strategies.
SEC, FINRA Investigate Questionable Trading Actions
On Thursday, The Wall Street Journal (WSJ) disclosed that financial authorities have contacted some of the over 200 firms with Digital Asset Treasury (DAT) plans after noticing peculiar trading behaviors in the days preceding the announcement of their crypto treasury strategy.
Sources acquainted with the situation informed the news outlet that the SEC and FINRA have investigated anomalous trading actions in the stocks of several unnamed firms that declared their intention to adopt a DAT strategy this year.
Allegedly, the regulators have voiced apprehensions in letters and discussions regarding “exceptionally high trading volumes and sharp increases in stock prices” that came before the announcement that these firms would integrate cryptocurrencies into their fundamental corporate strategy.
SEC representatives have cautioned these firms about possible infringements of Regulation Fair Disclosure, the WSJ sources claimed. As the news outlet highlighted, the regulation forbids public companies from “selectively revealing significant, nonpublic information to investors, analysts, and other market players who might act on the data.”
According to several legal professionals, such types of FINRA correspondence generally signal the initiation of serious investigations into insider trading. However, it remains uncertain whether the financial authorities are pursuing enforcement actions against any of these firms or investors.
Former SEC enforcement attorney and current SEC defense lawyer David Chase shared with WSJ that “when those communications are sent, it truly creates a stir. It’s commonly the initial phase in an investigation. Whether it progresses fully, it’s anyone’s speculation.”
The sources indicated that, in some instances, the confidentiality of the DAT announcements can be compromised, triggering unusual stock movements prior to the official declarations. In the meantime, attorneys who have dealt with crypto-treasury arrangements affirmed that information leaks can also adversely affect pricing transactions.
“If the stock price is significantly unstable in the days leading up to pricing a transaction, that could indeed complicate agreeing on a price for the transaction and jeopardize its execution,” Justin Platt, a partner at law firm Goodwin, disclosed to WSJ.
Crypto DAT’s Trajectory Persists
In recent months, the crypto treasury strategy trend, initiated by Michael Saylor’s Strategy, has gained traction, with 212 new firms announcing intentions to accumulate hundreds of billions of dollars to implement DAT strategies, the WSJ noted, referencing data from crypto consulting firm Architect Partners.
Throughout September, multiple firms have revealed crypto treasury strategies centered on Cardano (ADA), Avalanche (AVAX), and Solana (SOL). As reported by Bitcoinist, Solana-focused DATs have attracted hundreds of millions of dollars invested in the strategies this month.
Recently, Helius Medical Technology unveiled the initiation of a $500 million SOL treasury strategy supported by Pantera Capital and Summer Capital. Likewise, Nasdaq-listed Fitell Corporation, a worldwide supplier of fitness equipment and health solutions, has showcased the introduction of the first Solana-based digital asset treasury in Australia.
Simultaneously, leading crypto treasuries have continued to amass Bitcoin (BTC) and Ethereum (ETH), the foremost digital assets. BitMine, the largest ETH-focused treasury, recently surpassed the 2 million ETH landmark, while Strategy, the prominent Bitcoin and crypto treasury, acquired an additional 850 BTC earlier this week.
Bitcoin trades at $109,229 in the one-week chart. Source: BTCUSDT on TradingView
Featured Image from NBC News, Chart from TradingView.com
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