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SEC Suspends Four Firms and Warns of ICO Scheming
The Securities and Exchange Commission announced that it has issued trading suspensions on four firms “who made claims regarding their investments in ICOs or touted coin/token related news,” and has warned investors to protect themselves from other ICO-related schemes.
The four firms that have received temporary suspensions include First Bitcoin Capital Corp., CIAO Group, Strategic Global, and Sunshine Capital. The SEC warns investors to exercise caution if they’re considering investing in a stock following a trading suspension.
Here are the reasons a firm could receive a temporary trading suspension, according to the SEC:
- A lack of current, accurate, or adequate information about the company – for example, when a company has not filed any periodic reports for an extended period;
- Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status and financial condition; or
- Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.
The SEC highlights two especially prevalent schemes that some firms use: market manipulation and “pump-and-dump.” The former could include “spreading false and misleading information about a company (typically microcap stocks) to affect the stock’s share price,” while the latter “involve the effort to manipulate a stock’s share price or trading volume by touting the company’s stock through false and misleading statements to the marketplace.”
Among the tips the SEC gives investors:
- Always research a company before buying its stock, especially following a trading suspension. Consider the company’s finances, organization, and business prospects. This type of information often is included in filings that a company makes with the SEC, which are available for free and can be found in the Commission’s EDGAR filing system.
- Some companies are not required to file reports with the SEC. These are known as “non-reporting” companies. Investors should be aware of the risks of trading the stock of such companies, as there may not be current and accurate information that would allow investors to make an informed investment decision.
- Investors should also do their own research and be aware that information from online blogs, social networking sites, and even a company’s own website may be inaccurate and potentially intentionally misleading.
- Be especially cautious regarding stock promotions, including related to new technologies such as ICOs. Look out for these warning signs of possible ICO-related fraud:
- Company that has common stock trading claims that its ICO is “SEC-compliant” without explaining how the offering is in compliance with the securities laws; or
- Company that has common stock trading also purports to raise capital through an ICO or take on ICO-related business described in vague or nonsensical terms or using undefined technical or legal jargon.
You can read the SEC’s full statement here.
Photo: Getty iStock