Federal regulators are scrutinizing a growing number of companies that have embraced so-called crypto-treasury strategies this year, after unusual trading patterns in their shares caught their attention.
The corporate trend has exploded in recent months, with hundreds of companies investing in crypto this year. Crypto-treasury strategies, popularized by Strategy (formerly MicroStrategy), involve raising funds through stock or debt sales specifically to buy Bitcoin and other cryptocurrencies. For some of these companies, this scheme is no longer a side experiment; some are making investing in crypto the centerpiece of their corporate strategy.
For example, Strategy, which was founded in 1989, was best known as a business intelligence and software company before it pivoted to its current crypto-heavy corporate strategy in 2020 when it invested $250 million in Bitcoin. This past February, it dropped the Micro from its name.
The Wall Street Journal reported Thursday, citing unnamed sources, that both the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have reached out to several firms. People familiar with the matter told the newspaper that regulators are concerned about unusually high trading volumes and sharp stock-price gains ahead of public announcements about the crypto purchases.
SEC officials warned companies they could have potentially violated the Regulation Fair Disclosure rule, which prohibits public companies from selectively sharing non-public information with analysts and investors who might trade on it. Lawyers told the Journal that letters from FINRA often signal the beginning of probes into potential insider trading.
The SEC did not immediately respond to a request for comment from Gizmodo, while FINRA declined to comment.
For many firms, pivoting to a crypto-treasury involves quietly gauging interest from outside investors willing to privately finance their crypto purchases. These investors are usually required to sign nondisclosure agreements, keeping the companies’ identities secret until official announcements are made. But since some stocks spiked in the days leading up to the news of crypto purchases, it seems some info on these investments may have leaked.
According to the Journal, citing crypto-advisory firm Architect Partners, 212 new companies have announced plans to raise roughly $102 billion for crypto purchases so far this year.
The Wall Street Journal said it’s still unclear whether regulators plan to take action against the companies or investors.
The paper noted that SEC Chair Paul Atkins recently criticized the commission’s past tactics, saying it had “weaponized” its enforcement to stifle crypto.
Given the Trump administration’s pro-crypto policies, a lax reaction from the SEC wouldn’t be too shocking. The president has been very friendly with the industry, which has helped him make a fortune himself.
