SEC halts trading of three companies promoting crypto sales

SEC halts trading of three companies promoting crypto sales
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The Securities and Exchange Commission (SEC) on Friday suspended trading for shares of three companies that promoted plans to sell their own cryptocurrency.

The SEC banned investors from trading shares of Cherubim Interests Inc., PDX Partners Inc. and Victura Construction Group Inc. until March 2 as it investigates the companies.

All three companies announced in January that they had acquired high-quality blockchain technology, the ledger system through which cryptocurrencies operate. The companies said they would also launch an “initial coin offering” (ICO), in which a corporation sells units of a proprietary cryptocurrency as it would sell shares on the stock market.  

The SEC cited “questions regarding the nature of the companies’ business operations and the value of their assets” as the reason for its action. It’s the latest measure taken by the agency against companies aiming to rake in cash off of cryptocurrency’s rise.

The SEC warned investors in August to be wary of companies that announce cryptocurrency offerings to boost their stock prices. The agency told investors to avoid ICOs from companies that aren’t obligated to file federal financial disclosures, have recently formed or have little history

After cryptocurrency prices soared in December, the SEC beefed up its warning and has since cracked down on several cryptocurrency-related offerings.

“It is clear that many promoters of ICOs and others participating in the cryptocurrency-related investment markets are not following these laws,” the SEC said in a Jan. 4 statement.

Four days later, the SEC froze trading of shares of UBI Blockchain Internet, a Chinese company that advertises blockchain programs and services. The SEC cited potentially inaccurate information the company filed in its disclosures to the agency and “recent, unusual and unexplained market activity” around UBI stock since November.

The SEC has worked in tandem with the Commodity Futures Trading Commission (CFTC) to police cryptocurrency. The two federal trading regulators and their leaders, SEC Chairman Jay Clayton and CFTC Chairman J. Christopher Giancarlo have presented a united front in public statements and appearances before Congress.

“When market participants engage in fraud under the guise of offering digital instruments — whether characterized as virtual currencies, coins, tokens, or the like — the SEC and the CFTC will look beyond form, examine the substance of the activity and prosecute violations of the federal securities and commodities laws,” the agencies said in January after the CFTC filed charges in two fraud cases.