The U.S. Securities and Exchange Commission has placed a temporary trading halt on QMMM Holdings, a crypto treasury company, due to concerns over possible stock manipulation. This action follows a recent report about an investigation into various crypto treasury firms.
“The Commission temporarily suspended trading in the securities of QMMM because of potential manipulation,” the agency noted in a notice issued Monday, halting trading for 10 trading days.
The SEC stated that the purported manipulation involved “recommendations made to investors by unknown parties via social media to purchase” QMMM shares, with the intent to artificially inflate price and volume.
QMMM Holdings has seen its shares soar over 1,700% in the past month after announcing on September 9 its decision to buy and hold Bitcoin (BTC), Ether (ETH), and Solana (SOL), aligning itself with numerous companies pursuing similar strategies to enhance their stock value.
Neither the SEC nor QMMM Holdings provided immediate comments on requests for further information.
Crypto strategy unrelated to trading halt
Carl Capolingua, senior editor at Market Index, informed Cointelegraph that SEC trading suspensions are “very rare, generally due to repercussions for company management.”
“If the SEC traces those ‘unknown persons’ promoting the company’s stock back to employees, or worse, to management, the penalties can be severe, potentially including hefty fines or imprisonment,” he elaborated.
Capolingua indicated that while QMMM’s shift to crypto might appeal to some investors, its crypto strategy “is unlikely to attract SEC scrutiny” because the alleged “illegal stock promotion is the primary concern.”
IG Australia analyst Tony Sycamore advised Cointelegraph that for investors seeking crypto exposure, “such speculative plays are not advisable.”
QMMM gains over 1,700% before trading pause
QMMM Holdings (QMMM) shares closed trading at $119.40 on Friday, reflecting a surge of over 1,730% in the last month from around $6.50.
The stock jumped from $11 to an all-time peak of $207 in a single day after revealing plans to develop a crypto analytics platform, initially allocating $100 million to accumulate cryptocurrencies.
SEC, FINRA reportedly probe crypto treasuries
The SEC’s trading suspension of QMMM aligns with a report by The Wall Street Journal indicating that the SEC and the Financial Industry Regulatory Authority reached out to several companies that adopted a crypto treasury strategy.
Related: Crypto treasury mNAV metric ‘needs to be deleted’ — NYDIG
The SEC and FINRA have investigated unusually high trading volumes and price increases in various company stocks preceding the public announcement of their crypto shifts, according to sources familiar with the situation.
SEC regulations prohibit companies from selectively disclosing nonpublic information, as individuals in the know could exploit this to gain unfair advantages or prevent losses before broader public announcement.
Crypto treasury firms have recently surged in popularity on Wall Street, with over 200 new companies reportedly announcing plans to buy and hold cryptocurrencies.
Such announcements typically elevate the stock price of the involved company; however, analysts express concern that the market may become saturated and could witness several companies fail if the value of their holdings surpasses their market valuation.
Magazine: How Ethereum treasury companies could spark ‘DeFi Summer 2.0’
