SEC Launches Investigation Into Riot Blockchain
Cryptocurrency company Riot Blockchain is facing yet another legal action as the Securities and Exchange Commission (SEC) in the U.S. launches an investigation of the company.
Riot Blockchain, which was known as Bioptix, a biotech famous for having veterinary product patents and developing new ways of testing diseases before venturing into cryptocurrency mining in October last year.
The cryptocurrency company saw heightened growth in its stock price after changing its name has revealed that the SEC has begun an investigation that could see the company and stakeholders halt sales of shares.
The SEC investigation revealed in quarterly report
Information about the investigation of the U.S. Securities and Exchange Commission (SEC) emerged from the company’s quarterly report filed with the SEC.
Riot Blockchain revealed that the regulator is now looking into a number of the firm’s registration statements, as well as its acquisition of a minority stake in Coinsquare, a Canadian crypto exchange.
Riot released its second-quarter earnings on Tuesday. In it, the company said it received a letter from the SEC on July 30 saying the agency has begun the action “Pursuant to Section 8(e) [of] the Securities Act of 1933,” which says:
“If it appears to the Commission at any time that the registration STATEMENT includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may… issue a stop order suspending the effectiveness of the registration statement.”
Reed Brodsky, a Gibson Dunn partner said that disclosure is a potentially troubling development. Brodsky said:
“This SEC subpoena and the order do not appear to be the type of regularly issued subpoena in the normal course of the SEC’s OVERSIGHT of registrants. The company has to take this very seriously. An adverse finding by the SEC could be devastating to the company.”
Riot’s previous run-up with the SEC
Riot Blockchain, which is currently mining cryptocurrency in Oklahoma City, first revealed in April that the SEC had sent it a subpoena for information.
In April, CoinDesk reported that Riot said the SEC was investigating its assets and assets’ classification.
Riot then disclosed that it had received document requests from the SEC, noting that the regulator was looking into specific statements about its financial health from the past 10 months.
And in May, O’Rourke after a shareholder meeting said:
“I cannot comment on the subpoena, we don’t know the nature of the investigation and that’s all my attorney advised me to comment on.”
Riot Blockchain has reported that it holds nearly $5 million in digital currencies after seeing a nearly $3-million-dollar loss from the ongoing bear market over the last eight months.
Riot claims to have about $28 million in total assets (and an equivalent amount in liabilities and stockholders’ equity) as of June 2018, down from more than $52 million at the end of 2017.
Following the news, the shares of Riot Blockchain fell more than 12 percent on Wednesday, August 15.
In its most recent quarterly report, Riot said it “intends to cooperate fully with the examination.”. However, the SEC does not intend to act on Riot’s registration statements while the investigation is ongoing, this week’s filing said.