SEC cracking the whip on cryptocurrency related companies. SEC seems to be coming down quite heavily on the cryptocurrency-based companies. SEC has halted the trading of numerous such companies which are related to cryptocurrencies. Some of these companies include Cherubim Interests, PDX partners, Victura Construction group.
According to SEC, the valuation of their business, as well as various other business practices, leave a lot to be answered. This is the reason why trading of such companies has been stopped. The details which were filed by these companies included various assets as well as valuations based on the cryptocurrency and blockchain technology. This was one of the main reasons why SEC clearly stated that the valuation and as well as business mechanisms of these companies are not quite clear. Cherubim was even in the process of launching an ICO.
The trading of these companies has been suspended till March 2, 2018.
The CEO of all the 3 companies is Patrick Johnson. According to Michele Wein Layne who is the director of SEC Los Angeles, it is the time that the investors invest in these stocks with a pinch of salt. Moreover, he warned that the penny stock investors need to research more into the details of the company rather than just going by the trends of cryptocurrency or blockchain technology. He asked the investors to properly value ICOs as well as other offerings by the company before investing in them.
According to him, investors need to also ensure that these companies are complying with the regulatory framework. He added that only with the help of proper due diligence, most of the investors will be able to pick the right companies.
Currently, there is a lot of froth on the stock markets pertaining to companies which are related to blockchain and cryptocurrency space. This is the reason why investors need to be extra cautious in order to avoid any kind of losses in the future. Only with the help of proper due diligence, such problems can be avoided.
There have been numerous such instances where just by changing the name of the company to something which is related to blockchain and cryptocurrency, the stock prices are inflated by a significant amount. This is the reason why investors need to be more careful than ever to pick the right companies which have a solid business model in the cryptocurrency and blockchain space.
With that being said, it is important for any investor to value the asset depending on the core fundamentals rather than the hype before investing. This move by SEC does not come as a surprise to many companies taking advantage of the favorable trends and blockchain and cryptocurrency space.