U.S. financial regulators launch detailed probe into stock price surges at 'Digital Asset Treasury' companies

U.S. financial authorities are investigating trading patterns of companies that have promoted purchases of Bitcoin (BTC) and other virtual assets (cryptocurrencies) as a core strategy. In recent months, the number of companies announcing plans to adopt a "Digital Asset Treasury (DAT)" has surged, and regulators are closely watching after abnormal trading volumes and sharp stock price increases were observed just before announcements.

On the 25th (local time), The Wall Street Journal (WSJ) reported that the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have sent letters raising related suspicions to some of the roughly 200 companies that announced such strategies this year. However, it is not yet known whether any specific companies or investors have been identified as subjects of formal enforcement actions.

Regulators pointed to cases where a company's stock price rose abnormally just before announcements, warning of possible violations of Regulation Fair Disclosure. That rule prohibits publicly listed companies from providing material nonpublic information to certain investors or analysts only.

David Chase, a former SEC attorney, said, "Such letters are typically the first step that leads to insider trading investigations," adding, "Whether they will lead to actual enforcement is uncertain, but they create significant tension for companies and the market."

According to virtual asset asset-management adviser Architect Partners, 212 companies this year announced plans to raise about $102 billion through stock and bond issuances to purchase Bitcoin and tokens. This is a move following the model of the strategy.

The problem is that there have been cases in which non-public agreements were not upheld in the process. Companies sign nondisclosure agreements (NDAs) while contacting outside investors to discuss fundraising, but in some cases stock prices surged just before announcements, raising suspicions of information leaks.

Justin Platt, a partner at law firm Goodwin, pointed out, "If a stock's price fluctuates excessively just before a deal, pricing itself becomes difficult and the risk of the deal falling through increases," adding, "Information leaks not only raise insider trading suspicions but also negatively affect the actual fundraising process."