SEC Issues a Subpoena to Cryptocurrency Company whose stock Skyrocketed after Changing its name
The annual 10K report by Riot revealed that SEC delivered a subpoena on April 9 “requesting certain information from the Company.”
The report said:
“It intends to cooperate with the SEC request fully. The Company has announced its insurance carrier although there can be no assurance that the costs of compliance with the subpoena or any related matters will be eligible for insurance coverage. Nevertheless, response to the subpoena will entail cost and management’s attention.”
The Chairman of Riot Blockchain, John O’Rourke, in a news release said:
“We continue to focus on the expansion of our cryptocurrency mining operations and the active investigation of launching a cryptocurrency exchange in the United States. We see a strong integration opportunity of supply and demand between our mining operation and a potential exchange.”
Through an investigation conducted by CNBC in February, some red flags were found in the SEC filings that could contribute to making investors suspicious. Annual meetings that are postponed at the last minute, insider selling soon after the name change, dilutive issuances on favourable terms to large investors, SEC filings that are often Byzantine and, evidence that a significant shareholder was getting out while everyone else was getting in.
O’Rourke cited CNBC for publishing “a negative one-sided piece.”
The company also mentioned in the 10K report saying:
“We believe that many companies engaged in blockchain and cryptocurrency businesses have received subpoenas from the SEC which presents an additional industry risk.”
SEC Chairman Jay Clayton warned:
“It is not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures about the risks involved, As a result, we could be subject to substantial SEC scrutiny that could require devotion of significant management and other resources and potentially have an adverse impact on the trading of our stock.”
As bitcoin hit high records in late December, the hot new stock was making news on a daily basis. Riot Blockchain’s stock also jumped from $8 a share to more than $40, due to investors’ craze of cashing on in all things crypto.
But Riot hadn’t been in the crypto business since long. It was called Bioptix until October and was known for indulging in veterinary products patent and developing new ways to test for diseases.
The company doesn’t expect profitable saying, “we might continue to incur losses for the foreseeable future, and these losses could increase as we continue to develop our business.”
The report said it would focus on bitcoin mining and setting a cryptocurrency exchange and future brokerage operations.
Riot alerted that it “may never become profitable.”
The report Included:
“Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.”