Trading in the shares of QMMM Holdings, a firm dealing in cryptocurrency reserves, has been temporarily suspended by the U.S. Securities and Exchange Commission (SEC). This action stems from concerns about potential stock market manipulation and follows recent reports of regulatory inquiries into several crypto treasury management businesses.
The SEC issued a formal statement on Monday, explaining that the trading halt on QMMM stock will last for ten trading days due to “potential manipulation.”
The SEC alleges that the suspected manipulation involved “recommendations made via social media by unidentified individuals” encouraging investors to purchase QMMM shares. According to the SEC, these recommendations “appear to have been designed to artificially inflate the price and trading volume” of the stock.
QMMM Holdings’ stock value has skyrocketed by over 1,700% in the past month after the company revealed on September 9th its intentions to acquire and hold Bitcoin (BTC), Ether (ETH), and Solana (SOL). QMMM is one of numerous companies pursuing similar strategies in hopes of boosting their stock valuations.
Neither the SEC nor QMMM Holdings immediately responded to requests for comments regarding this situation.
Crypto Strategy Unrelated to Trading Halt
Carl Capolingua, a senior editor at Market Index, a market analysis platform, mentioned to Cointelegraph that SEC trading suspensions are “quite uncommon, primarily because of the implications for the company’s management.”
He further elaborated, “If the SEC can prove that the ‘unknown persons’ who promoted buying the company’s stock are linked to employees, or, more seriously, to management, the penalties can be substantial, potentially including significant fines or even imprisonment.”
Capolingua noted that while QMMM’s shift toward cryptocurrency might have made the company more appealing to some investors, the company’s crypto-focused strategy “is unlikely to be a subject of investigation” by the SEC. He emphasized that the primary concern is the alleged “illegal stock promotion.”
Tony Sycamore, an analyst at IG Australia, advised Cointelegraph that if investors are seeking cryptocurrency exposure, “these kinds of high-risk plays are not advisable.”
QMMM Shares Experience Massive Gains Before Pause
QMMM Holdings (QMMM) shares closed on Friday at a price of $119.40, having risen more than 1,730% in the preceding month from approximately $6.50.
After announcing its intention to develop a cryptocurrency analytics platform and initially allocate $100 million to accumulating cryptocurrencies, QMMM shares soared from $11 to a record high of $207 in a single trading day.
Reports Suggest SEC and FINRA are Investigating Crypto Treasuries
The SEC’s suspension of trading in QMMM shares follows a report published in The Wall Street Journal on Thursday. The report indicated that the SEC and the Financial Industry Regulatory Authority (FINRA) have contacted several companies that have recently adopted a crypto treasury strategy.
Related: Crypto treasury mNAV metric ‘needs to be deleted’ — NYDIG
According to individuals familiar with the matter, the SEC and FINRA are examining unusually high trading volumes and stock price increases in certain companies before their public announcements regarding their adoption of crypto strategies.
SEC regulations prohibit companies from selectively disclosing non-public information, as those privy to such information could exploit it for unfair gains or to avoid losses before the information becomes widely available to the public.
The concept of crypto treasury companies has gained significant traction on Wall Street in recent months. According to the Journal, over 200 new companies have announced intentions to buy and hold cryptocurrencies.
While such announcements typically lead to an increase in the company’s stock price, some analysts are concerned that the market is becoming overcrowded and that multiple companies could potentially fail if the value of their crypto holdings falls below their market capitalization.
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