Securities and Exchange Commission is taking strict action against overnight Blockchain companies: chairman

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Securities and Exchange Commission is taking strict action against overnight Blockchain companies: chairman
Securities and Exchange Commission is taking strict action against overnight Blockchain companies: chairman

The U.S. Securities and Exchange Commission (SEC) have started the process of inspection against public companies that change their name or business model in order to get capitalize upon the hype surrounding Blockchain Technology, SEC Chairman Jay Clayton said on Monday.

In last couples of weeks, dozens of little-known companies around the world have seen their share prices jump after revealing their strategy to go into the bitcoin industry or that of its fundamental distributed ledger Blockchain technology.

In December 2017, the SEC suspended trading in the shares of Crypto Company (CRCW.PK) for the time being. The reason behind this move was a deal by small company to buy a Cryptocurrency data platform that and after signing that contract firm saw its stock rise more than 2,700%.

Clayton (the Chairman of SEC) warned that it was not acceptable for companies to change their name and instantly offer investors securities with no adequate disclosures around the risks involved.

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It is also risky because without a significant track record in the sector to dabble in Blockchain technology.

While talking to a conference on Monday Clayton said,

“The SEC is looking closely at the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology and whether the disclosures comply with the securities laws, particularly in the case of an offering”

The chairman also added the SEC had seen “disturbing” proof that legal professionals have been incorrectly counseling clients that initial coin offerings.

On the other hand, Cryptocurrency start-ups are seeking funds from investors who receive tokens in return. They are not meeting the terms with federal securities law.

In the past, SEC has warned investors in clear words over the risks of cryptocurrency fraudsters and said that such fundraisings should obey securities law.

“I have instructed the SEC staff to be on high alert for approaches to ICOs that may be contrary to the spirit of our securities laws and the professional obligations of the U.S. securities bar,” Clayton said.

The current situation is alarming for all those companies who change their names and disobeyed the securities laws in a bid to get capitalize over Cryptocurrency.

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