What has happened?
The US Securities and Exchange Commission (SEC) has temporarily suspended the trading of three companies as it investigates statements they made about the acquisition of cryptocurrency and blockchain-related assets.
What does this mean?
The SEC has indicated that Cherubim Interests Inc, PDX Partners Inc, and Victura Construction Group Inc had claimed in press releases that they had acquired AAA-rated assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology, among other things.
According to the SEC order regarding Cherubim, the company had also announced the execution of a financing commitment to launch an initial coin offering (ICO).
According to a SEC release, the regulator has questions regarding the nature of the companies’ business operations and the value of their assets, including in press releases issued from January 2018.
Tthe Commission also suspended trading in the securities of Cherubim because of its "delinquency in filing annual and quarterly reports".
The suspensions represent the latest move in the SEC's increased scrutiny of the cryptocurrency market.
In August 2017, the SEC issued a warning to investors about companies that announce ICO or coin/token-related events to affect the price of the company’s common stock – which is known as "pump-and-dump" schemes.
Earlier this month, the SEC stopped an alleged ICO scam that was touted as the world's first "decentralised bank".
Also this month, the US Commodity Futures Trading Commission warned investors to stay clear of cryptocurrency pump-and-dump schemes, describing them as "old scams, new technology".
The suspension applies from 9:30 am EST on 16 February 2018 to 11:59 pm EST on 2 March 2018.
For more news and analysis that is tailored to you, as well as access to Hogan Lovells' cutting-edge interactive Lawtech tools, register for free on Engage.