Transformed into a "digital currency treasury" and stock price skyrocketed, the US SEC begins investigating "pre-positioned" funds.

```

U.S. financial regulatory agencies are investigating abnormal trading patterns at over 200 companies that have announced adopting cryptocurrency treasury strategies, where these companies' stock prices surged sharply before announcing plans to purchase digital assets such as Bitcoin.

According to media reports on September 25, the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (Finra) have contacted some companies whose stock prices experienced unusual movements after announcing plans to purchase digital assets like Bitcoin as part of their core business strategy.

In conversations and letters with the relevant companies, regulators specifically emphasized concerns over potential violations of fair disclosure regulations. These regulations require publicly listed companies to treat all market participants equally when disclosing important information and prohibit selective disclosure of insider information that could be used for trading.

This regulatory review brings new uncertainty to companies that are following the so-called “cryptocurrency treasury” strategy. Former SEC enforcement attorney David Chase said:

When these letters are sent, it does shake up the market. This is usually the first step of an investigation. As for whether there will be a full investigation, that's hard to say.

The Rise of Cryptocurrency Treasury Strategies

Cryptocurrency treasury companies have surged in large numbers over the past few months, following the model pioneered by Strategy.

The core of this strategy is to raise funds by issuing stocks and bonds to purchase Bitcoin and other digital tokens.

According to crypto advisory firm Architect Partners, so far this year, 212 new companies have announced plans to raise approximately $102 billion for cryptocurrency purchases.

For many companies, turning to a cryptocurrency treasury strategy typically requires reaching out to groups of external investors to gauge their interest in private financing for token purchases.

However, in this process, investors are required to sign confidentiality agreements to maintain the company’s identity secrecy until the new strategy is announced.

Risks from Breached Confidentiality Agreements

Sources cited in the reports said that in some cases, such confidentiality appears to have been breached, with some stocks surging significantly in the days before the announcements.

Lawyers involved in cryptocurrency treasury transactions pointed out that information leaks can not only raise suspicions of insider trading but actually also cause harm to transaction pricing.

Justin Platt, a partner at law firm Goodwin, stated:

If a stock's price fluctuates wildly in the days just prior to trade pricing, it can actually make it very difficult to reach a deal price and exposes the transaction to execution risk.

It is worth noting that Paul Atkins, Chairman of the U.S. Securities and Exchange Commission, criticized regulators in a recent speech for previously “weaponizing” their enforcement power to stifle the crypto industry, and stated the agency will now provide the industry with “clear and predictable rules.”

This may suggest that ongoing investigations are also part of regulatory efforts to establish clear market rules for this emerging sector.

Risk Warning and DisclaimerThe market involves risks and investments should be made with caution. This article does not constitute individual investment advice, nor does it take into account unique investment objectives, financial situation, or needs of any individual user. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific situation. Invest accordingly at your own risk. ```