SEC Investigating Companies Carrying out Possible Blockchain Fraud

SEC Investigating Companies Carrying out Possible Blockchain Fraud

It would appear that the United States Securities and Exchange Commission (SEC) has decided to look a bit more closely at companies who use misleading names to try and promote an artificial uptick of stock value in what could be termed blockchain fraud.

Disproportionate spike in prices

The reasoning behind such an initiative lies with certain companies who have no ties to blockchain technologies carrying out a “rebrand” of sorts to place new shares in the stock market.

This type of tactic, which could be looked at as blockchain fraud, can see a disproportionate spike in prices without any real change in the direction of the company involved.

The use of the term “blockchain” in a company name tends to generate an image and expectation among both customers and investors, and a corporate rebrand to include such a term could be the result of management looking to produce the kind of response that such companies are seeing at the moment.

One of the first companies to see action as a result of the initiative is UBI Blockchain Internet LTD.

Despite its tech company-sounding name, UBI Blockchain Internet actually specializes in the sale of cosmetics, children clothes, household goods and maternity clothing.

Part of a strategy to commit blockchain fraud

The investigation, which was carried out by the Microcap Fraud Task Force and the Financial Industry Regulatory Authority, saw the SEC determine that the use of the word “blockchain” was part of a strategy to commit fraud through illegal sales of shares at unauthorized prices.

An official press release said –

“The SEC’s complaint alleges that Jesky, and DeStefano, both residents of Nevada, received 72,000 restricted shares of UBI Blockchain stock in October 2017 and were permitted to sell the shares at a fixed price of $3.70 per share under the registration statement. Instead, the complaint alleges that Jesky and DeStefano unlawfully sold the shares at much higher market prices – ranging from $21.12 to $48.40 – when UBI Blockchain’s stock experienced an unusual price spike.”

The SEC had already demanded the suspension of UBI Blockchain securities trading because of the misleading information under which they had decided to operate –

“The Commission temporarily suspended trading in the securities of UBIA because of (i) questions regarding the accuracy of assertions, since at least September 2017, by UBIA in filings with the Commission regarding the company’s business operations; and (ii) concerns about recent, unusual and unexplained market activity in the company’s Class A common stock since at least November 2017”

Another typical case involves New York company Long Island Iced Tea, who switched their name to Long Blockchain Corp, boosting their shares by up to 200 percent.

The Nasdaq stock market exchange later delisted them.

Lover of all things crypto, blockchain and AI, professional tech scribe & part of the editorial team at Crypto Disrupt.

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