URGENT UPDATE: Federal regulators are intensifying their scrutiny of companies involved in crypto-treasury strategies, following alarming trading patterns that have raised red flags. As of today, both the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have launched inquiries into these firms after reports of unusual stock activity before major cryptocurrency purchases.
The trend of crypto-treasury strategies has surged in 2023, with 212 companies planning to raise approximately $102 billion for cryptocurrency investments this year alone. These strategies—popularized by Strategy (formerly MicroStrategy)—involve raising funds through stock or debt sales specifically to buy digital assets like Bitcoin. For many of these companies, this approach has transitioned from a side project to the core of their business models.
According to a report from the Wall Street Journal, regulators have observed significant spikes in trading volumes and stock price surges ahead of public announcements related to crypto purchases. This has prompted concerns over potential violations of the Regulation Fair Disclosure rule, which prohibits selective sharing of non-public information that could impact trading behavior.
SEC officials have issued warnings to companies that they may have breached this regulation. Legal experts cited by the Journal indicate that communication from FINRA is often a precursor to deeper investigations into insider trading allegations.
Many firms engaging in crypto-treasury strategies are discreetly exploring interest from private investors who may finance their digital asset purchases. These investors typically sign nondisclosure agreements, ensuring that company identities remain confidential until official announcements are made. However, the recent trading spikes suggest that some information may have been leaked prematurely.
The SEC has yet to confirm whether it will pursue action against the implicated companies or investors. Recently, SEC Chair Paul Atkins criticized the commission’s enforcement tactics, suggesting that past approaches may have hindered the growth of the crypto industry. Given the previous pro-crypto stance of the Trump administration, a lenient response from the SEC would not be surprising.
As developments unfold, industry watchers are keenly observing how regulators will respond to these emerging concerns. The outcomes could have significant implications for the future of corporate investment strategies in cryptocurrency.
Stay tuned for further updates as this story continues to develop.
