SEC Watching Blockchain Bandwagon Companies

January 23, 2018
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The Securities and Exchange Commission in the U.S. said Monday (Jan. 22) it will place greater scrutiny on companies that are publicly traded and change their name and/or business focus to benefit from the blockchain and cryptocurrency-fueled craze going on right now.

According to a report in Reuters, SEC Chairman Jay Clayton said it’s not okay for public companies that don’t have a track record in blockchain to play around with the technology, change their names to reflect their blockchain efforts and then offer securities without providing sufficient disclosures about the risks.

“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering,” Clayton said at a conference. He also noted that the SEC has seen evidence that lawyers have been giving clients inaccurate information about initial coin offerings, saying that the ICOs don’t have to be in compliance with federal securities laws.

“I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” Clayton said.

Ever since blockchain has garnered increasing interest from all sorts of investors, companies have been attaching the word “blockchain” to their title and watching their stocks surge as a result. At the end of 2017, the SEC took steps to temporarily halt trading in Crypto Company after its stock jumped more than 2,700 percent, all because it inked a deal to buy a cryptocurrency data platform provider.

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