SEC and FINRA Probe Unusual Stock Activity Before Crypto-Treasury Deals

TLDR

• The SEC and FINRA are investigating unusual stock trading patterns before crypto-treasury announcements.
• Regulators are focusing on abnormally high trading volumes and sharp stock price increases.
• The SEC is concerned about potential violations of Regulation Fair Disclosure.
• Companies are required to share material, non-public information broadly to all investors.
• The crypto-treasury trend has seen significant growth, with over $20 billion in venture capital funding this year.

U.S. regulators are investigating unusual stock trading patterns before publicly listed digital asset treasury companies (DATs) announce plans to acquire crypto assets. The Securities Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) are examining some of these companies for possible violations. Sources close to the investigation shared these details with the Wall Street Journal.

Regulatory Focus on Trading Activity

The SEC and Finra are investigating abnormally high trading volumes and sharp stock price increases. According to the report, these trading spikes occurred just before public announcements regarding crypto purchases. The SEC is specifically concerned about potential violations of Regulation Fair Disclosure, which mandates that companies share material, non-public information broadly.

Regulation Fair Disclosure ensures that companies disclose significant information to all investors equally. The goal is to prevent certain investors from gaining an unfair advantage by trading on exclusive, insider knowledge. SEC officials have reminded companies about the importance of adhering to this rule in their trading practices.

Crypto-Treasury Trend and Regulatory Scrutiny

The surge in corporate interest in crypto-treasury strategies has triggered this scrutiny. Since 2020, companies like Strategy have led the way by purchasing significant amounts of Bitcoin as part of their corporate treasuries. With over $20 billion in venture capital funding this year alone, the crypto-treasury trend is gaining momentum across multiple industries.

More companies are adopting crypto-treasury strategies, which involves holding cryptocurrencies like Bitcoin on their balance sheets. As a result, regulators are intensifying their scrutiny of trading activities ahead of significant announcements.

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