The U.S Securities and Exchange commission (SEC) is examining public firms that are changing their names overnight in a bid to cash in from the crypto currency craze. According to SEC chairman Jay Clayton, the commission has noticed a trend where publicly traded firms are changing their names to bitcoin or blockchain to boost their share value. In most instances, any firm that has undertaken such a move has recorded double digit growth on its share price.
Tens of little known firms have since announced change of names to signal their entry into the crypto currency industry. The trend, which is reminiscent of the infamous dot-com bubble, seems to work for most companies. In December, for instance, the SEC suspended trading of a small firm which had changed its name to Crypto Company. The small firm had just announced the acquisition of crypto currency data platform. As a result, its share prices jumped 2,700 % attracting the surveillance of the SEC which aptly cracked the whip and suspended further trading at the exchange.
Soon after joining the crypto currency industry, companies are embarking on raising funds through an initial coin offering,a practice that does not auger well with the SEC. Clayton said he was greatly saddened by new evidence that shows that legal professionals have been providing wrong counsel to their clients insisting that start-ups do not need to conform with federal security laws. The SEC had previously stated that all ICOs must comply with the securities laws even as it intensified its warning calls to investors over the increasing risk of crypto currency fraudsters.
The SEC chairman warned firms from dabbling into the blockchain technology without prior knowledge of how the technology worked. He further said it was wrong for companies to offer securities to investors before disclosing the risks involved. “The SEC is closely scrutinizing disclosures provided by public firms which have changed their business models to capitalize on the promise of the blockchain technology. The SEC intends to verify whether such disclosures, as well as the Initial Coin offerings are compliant with the law,” he said.