The Securities and Exchange Commission (SEC) has suspended trading in three over-the-counter cryptocurrency and blockchain companies, the agency said Friday, amid widening concerns among regulators about security, fraud, and the motives of so-called " blockchain pretenders."
The three Oregon-based firms in question, PDX Partners, Inc., Victura Construction Group, and Cherubim Interests, Inc., had trading of their stocks suspended for 10 days by the SEC under the auspices of public interest and investor protection. Neither the SEC suspension orders, nor any of the announcements by the companies surrounding the acquisitions, however, seem to actually focus on blockchain or cryptocurrencies. The assets that were acquired were trust units (shares) in a management company for a private equity fund that invests in at least 12 disparate sectors, including blockchain and cryptocurrencies.
They had published press releases in January claiming to have acquired assets from a private equity firm that has interests in cryptocurrency and blockchain technology in its businesses.
“There are questions regarding the nature of the companies’ business operations and the value of their assets, including in press releases issued beginning in early January 2018,” the SEC wrote in a post on its site, adding that trading in Cherubim had also been stopped due to delinquency in filing of annual and quarterly reports.
“This is a reminder that investors should give heightened scrutiny to penny stock companies that have switched their focus to the latest business trend, such as cryptocurrency, blockchain technology, or initial coin offerings,” said Michele Wein Layne, Director of the Los Angeles Regional Office.
All three companies are helmed by CEO Patrick Johnson, former NFL journeyman wide receiver. All three companies are penny stocks with outdated financial information and unaudited or poor bookkeeping. These so-called “penny stocks” are typically a great concern for U.S. regulators as they are often the subject of attempted price manipulation or fraud.
But Patrick Johnson, has said they were not involved in “the cryptocurrency space."
Valuations of companies that have tacked onto the blockchain and cryptocurrency craze have jumped in recent times. But the SEC has taken an increasingly strident stance against such companies and cracked down on their operations. For example, it halted trading in UBI Blockchain Internet last month due to “unusual and unexplained market activity.” (See also: UBI Blockchain: SEC Halts Trading After Surge Of 900% In 2017).