Companies considering riding the blockchain wave to a stock price increase should first consult the Securities and Exchange Commission.
After scrutinizing their bank statements and companies, the regulatory body banned trading in three Oregon-based corporations last week. Cherubim Interests Inc. (CHIT), PDX Partners Inc. (PDXP), and Victura Construction Group Inc. (VICT) are OTC penny stocks. They issued press releases in January claiming to have acquired assets from a private equity group with investments in bitcoin and blockchain technologies.
“There are concerns about the nature of the companies’ business operations and the value of their assets, including in press releases issued beginning in early January 2018,” the SEC wrote in a post on its website, adding that trading in Cherubim had been halted due to late filing of annual and quarterly reports.
“This is a warning to investors that penny stock businesses that have shifted their emphasis to the next business fad, such as cryptocurrencies, blockchain technology, or initial coin offerings, should be scrutinized more closely,” said Michele Wein Layne, Director of the Los Angeles Regional Office. However, Patrick Johnson, the CEO of all three organizations, has said that they are not participating in “the cryptocurrency arena.”
Companies that have jumped on the blockchain and cryptocurrency bandwagon have seen their valuations skyrocket in recent months. However, the SEC has adopted a more severe position against such firms and has clamped down on their activities. For example, owing to “unusual and inexplicable market behavior,” it suspended trading in UBI Blockchain Internet last month.
During a recent congressional hearing, SEC Chair Jay Clayton also spoke out against initial coin offerings (ICOs), claiming that every ICO he had seen was a security token. Security tokens, as opposed to utility tokens, are subject to SEC regulation. Cohen’s comments might be seen as an indication of the agency’s future plans. (Also see: Is Ethereum a Security? Confusion is sown by SEC Chair.)
Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin as of the day this article was published.
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