Sighting Cryptocurrency Ties, SEC Suspends Trading in 3 Companies

Last week on Friday, Feb 16, the financial watchdog U.S Securities and Exchange Commission suspended three companies from trading due to their involvement with buying and purchasing cryptocurrency and blockchain-related assets.

The financial watchdog has expressed serious concerns regarding the adequacy and accuracy of information on acquiring of digital assets from investors. The SECs concerns further grew especially when one of the suspended firms also announced the plans of launching an Initial Coin Offering (ICO).

As per the official suspension document, the three companies to suspended include Cherubim Investments, Inc., PDX Partners, Inc., and Victura Construction Group, the order follows between Feb-16 to March-2.

The SEC wrote: “The SEC's trading suspension orders state that recent press releases issued by CHIT, PDXP and VICT claimed that the companies acquired AAA-rated assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology, among other things. According to the SEC order regarding CHIT, it also announced the execution of a financing commitment to launch an initial coin offering.”

The SEC has warned investors by putting their money in the investments schemes proposed by these three companies as they have ventured into the crypto space without following U.S securities laws and there is a higher probability that they may face stricter action.

As per the release published by the SEC, the financial watchdog has sighted some additional reasons for the suspension. In case of Cherubim, SEC says that the trading was halted due to "its delinquency in filing annual and quarterly reports.”

Last year in the wake of crypto mania, a usual trend observed that stock prices of many companies shotted up only due to their associated with blockchain or crypto activities. There were also few companies which saw a huge appreciation in its stock price just by associating the word ‘blockchain’ to its business.

This showed quite a similar scenarios decades back when companies got a huge stock-price appreciation just by getting the “dot-com” tag to its businesses.

Last year, the SEC had warned investors against participating in such pump-and-dump schemes which lure investors through ICOs. The SEC said: "Fraudsters often try to use the lure of new and emerging technologies to convince potential victims to invest their money in scams.”

Michele Wein Layne, Director of SEC’s Los Angeles Regional Office, commented: This is a reminder that investors should give heightened scrutiny to penny stock companies that have switched their focus to the latest business trend, such as cryptocurrency, blockchain technology, or initial coin offerings.”