US Regulators Investigate Unusual Stock Trade Patterns Before Crypto Buys by Publicly-Listed Digital Asset Treasury Companies

U.S. regulatory bodies are reportedly examining for evidence of unusual trading activities around digital asset treasury companies (DATs), amid rising corporate interest in crypto assets. This comes off the back of the Wall Street Journal’s (WSJ) report that the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) have begun digging into certain trading anomalies, according to sources close to the matter.

SEC and Finra Set Sights on Strange Trading Patterns

These regulatory bodies are scrutinizing trading behaviors that occurred just prior to official announcements of significant crypto acquisitions by DATs. The WSJ revealed on Thursday that SEC and Finra have reached out to some of those companies in an attempt to draw out more information. Trading pattern anomalies are often linked to potential regulatory concerns, with an unusually high trading volume and sharp increases in stock prices shortly before public announcements being a particular focus for SEC officials.

Regulatory Focus on Fair Disclosure

Regulation Fair Disclosure is a particular area of concern. Under this rule, any non-public, significant information must be shared widely, as opposed to selectively with only key market participants. The intention behind the regulation is to ensure that all market participants have equal access to information, rather than a restricted few who could potentially trade ahead of public announcements and thus gain an unfair advantage. There have been concerns that some may have violated these regulations.

The Upsurge of Corporate Interest in Crypto

This growing regulatory scrutiny occurs amidst a surge in corporate interest in crypto. Many are choosing to follow the model set by Strategy, a firm which has invested billions in Bitcoin since 2020. This pattern of corporates incorporating crypto into their treasury portfolios has thus seen a significant uptick in recent times, with various industries deciding to acquire cryptocurrency as part of their corporate treasury strategies.

Rise of Digital Asset Treasury Companies

DATs have seen substantial investment, garnering more than $20 billion in venture capital funding in just this year. These companies have played a large role in the incorporation of cryptocurrencies into mainstream business operations, highlighting the growing acceptance of these digital assets in the broader economy. Among these, Strategy, helmed by Michael Saylor, remains the largest corporate holder of Bitcoin, with a recent purchase of another 850 BTC bringing its total to 639,835 BTC.

Investigations Underway

While these trends demonstrate a significant moment for the crypto industry, the recent scrutiny shows that regulators are taking note. The SEC and Finra’s ongoing investigation of trading patterns around DATs may shape future guidelines and regulation within the digital asset space. As the line between standard financial operations and digital assets blurs, the nature of monitoring and regulation is set to undergo significant change. Disclaimer: The content of this article is purely informational and should not be considered as financial, legal, tax, or investment advice.