- The SEC and FINRA have sent letters to more than 200 companies that have made ‘crypto treasury’ announcements in the past year, investigating suspicious trading activity in the run-up to the announcements.
- Reg FD requires that companies make the same material disclosures to the public as they do to institutional investors or analysts. Recently, AT&T agreed to a record $6.5 million penalty for Reg FD violations.
- ‘Crypto treasury’ companies have sought to follow the Strategy (formerly Microstrategy) (NASDAQ: MSTR) playbook by hoarding digital assets, but many have been forced to institute share buyback programs to alleviate drooping stock prices.
U.S. regulators are investigating swings in company stock prices that preceded announcements that they planned to create digital asset treasuries, according to the Wall Street Journal.
The Journal reports that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have reached out to over 200 companies that had announced digital asset treasuries this year. FINRA is a subsidiary agency of the SEC responsible for enforcing compliance with fair practice and market rules.
Citing individuals familiar with the investigations, the Wall Street Journal said that the regulators were ‘raising concerns’ with companies that saw unusually high volumes and sharp price upticks immediately prior to making their digital asset announcements.
The SEC particularly warns companies about potential Regulation Fair Disclosure (Reg FD) violations. Reg FD requires that, where public companies disclose material, non-public information to certain groups of individuals (such as analysts or institutional investors), they must make simultaneous disclosures to the public. In essence, it protects investors from limited disclosure and is intended to increase transparency and accountability in public markets.
Violations of Reg FD trigger the SEC’s general disclosure violation penalties. These are civil punishments rather than criminal ones, but penalties can include fines of up to $500,000 per violation. Individuals who aid company violations can also be penalized under SEC rules.
For instance, in 2022, the SEC agreed to a record settlement with telecoms company AT&T (NASDAQ: T) for violations of Reg FD. AT&T had instructed its investor relations department to work with industry analysts to revise their earnings estimates for the AT&T stock downward after AT&T learned that it was facing a steeper-than-expected decline in smartphone sales in 2016. AT&T was forced to pay $6.25 million in penalties; three investor relations executives were also charged with aiding and abetting the violations and received fines of $25,000 each.
Since the explosion of ‘crypto’ acceptance among governments and the mainstream, companies have been following the Strategy (formerly known as Microstrategy) playbook by committing to putting digital assets on their balance sheets. Since 2020, Strategy has accumulated more $60 billion worth of BTC, and until formal BTC ETFs were approved in the U.S., the ticker was seen as a de facto substitute. The company is up almost 2,000% over the past five years.
The Wall Street Journal Report includes figures from crypto advisory firm Architect Partners, which claims that 212 new companies have made digital asset treasury announcements in 2025 alone, collectively promising around $102 billion toward the projects.
Outwardly, these companies explain this by extolling the virtues of the technology to justify the decision. However, it’s fair to wonder whether these companies are chasing similar stock price boosts that were enjoyed by Strategy.
That this is their true motivation is more obvious for some than others. For example, a press release from an entity called Mercurify Fintech raised eyebrows for announcing that the company planned to raise $800 million to fund a Bitcoin reserve; an improbable goal given the company’s annual turnover is no more than $1 million.
However, in a sign that these strategies are failing to pay off for some chancers, self-professed treasuries have begun share buyback plans as they try to boost stock prices that, in many cases, put the total value of their companies at less than the total value of digital assets they hold in treasury.
For example, in August, Peter Thiel-backed biotech firm 180 Life Sciences announced it would begin hoarding ETH, changing its name to ETHZilla. The share price immediately rocketed from under $5 to well over $16, but had already given back its gains by early September. Shortly after, the company announced a $250 million buyback plan.
SharpLink Gaming tells a similar story: the company has accumulated $3.7 billion in ETH, yet its share price at the time of writing has the company valued at $3.13 billion. In August, the firm announced a $1.5 billion buyback program; its share prices have only slumped since.
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Source: https://coingeek.com/us-regulators-investigating-unusual-trading-activity/
