Regulatory focus on unusual crypto trading activities

The U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have reportedly contacted certain companies following unusual trading activities observed prior to announcements about digital assets. The investigation targets over 200 companies that have disclosed strategies regarding crypto treasuries this year. Only a portion of these companies has been deemed suspicious, as reported by the Wall Street Journal, citing individuals familiar with the matter. Decrypt has reached out to the SEC and FINRA to confirm the reports. According to these reports, the actions followed rapid price changes and high trading volumes noticed shortly before companies made their digital asset strategies public. The strategy of Michael Saylor's company, which claims to use debt or equity to acquire digital assets as balance sheet reserves, serves as a model. Observers warn that poorly timed or opportunistic crypto treasury strategies could appear gimmicky and expose companies to risks such as forced liquidations. Regulatory authorities are investigating whether there were selective information leaks or insider trading with non-public information. The so-called Regulation Fair Disclosure (Reg FD) of the SEC prohibits companies from providing material information in advance to selected investors. Violations result in civil penalties, enforcement actions, and reputational risks. Andrew Rossow, a public relations attorney, emphasizes that Reg FD is designed to ensure that all investors have simultaneous access to relevant corporate information, which could impact their valuation or risk profile. Violations include targeted dissemination of confidential information by companies. Since these investigations often arise from unusual trading activity, authorities are searching for communication patterns that can link suspicious trading back to the source of the information. This includes emails, meeting notes, internal platforms, text messages, calendar invitations, and device control recordings.