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- SEC probes suspicious stock trades before crypto acquisition announcements.
- Regulators focus on unusual trading volumes and price increases.
- Growing corporate crypto interest sparks increased SEC and FINRA scrutiny.
U.S. regulators are probing suspicious stock trading patterns that occurred just before companies in the Digital Asset Treasury (DAT) sector publicly announced their plans to acquire cryptocurrency. As reported by the Wall Street Journal, unusual stock activities are the focus of both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA). The investigation dwells upon steep price gains and abnormally high trading volumes ahead of crypto acquisition announcements.
Of special interest to regulators is the possibility of breaching Regulation Fair Disclosure (Reg FD). According to this rule, firms are required to share crucial, non-public information with the general public without providing an unfair advantage to some investors. Had insiders or some investors known about the impending crypto purchase announcements, they may have made money trading before the announcement came out. The SEC is quoted as warning a number of DAT firms of the dangers of such selective disclosures.
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Crypto Treasury Trend Spurs Corporate Adoption and Regulatory Attention
The audit arrives when the popularity of crypto treasuries among large companies is skyrocketing. Following the example set by companies such as Strategy, large number of companies are becoming financial adopters of cryptocurrency. An example is Strategy, which has been buying Bitcoin since 2020. Recently, it has bought 850 more BTC, meaning it currently owns more than 639,000 BTC. This has seen an increased number of over 200 digital asset treasury companies, which have raised an estimated sum of more than 20 billion in venture capital this year.
With increased corporate interest in crypto, there is a greater demand for the sector to be regulated. The SEC and FINRA are prioritizing market fairness, especially the trading activity around crypto purchase announcements. As the number of companies adopting cryptocurrency as part of their corporate strategies continues to rise, regulators are interested in ensuring that the market is not manipulated and that insider trading does not skew it.
This jurisdiction indicates that regulators will continue to monitor this fast-paced industry as more companies switch to cryptocurrency.
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