Riot Blockchain is a former biotech firm that changed its name to contain the word “blockchain” last year, seeing valuations skyrocket from $8 a share to over $40 as a result, according to a CNBC report. It is reportedly currently operating a crypto mining facility in Oklahoma City.
This week’s quarterly earnings report reveals that the firm received a letter from the SEC on July 30 indicating that the agency had begun an action “Pursuant to Section 8(e) [of] the Securities Act of 1933,” with particular scrutiny given to Riot Blockchain’s registration statements.
Under Section 8, if the SEC thinks that the registration statement contained “any untrue statement” or omitted any “material facts,” it may “issue a stop order suspending the effectiveness of the registration statement.”
Issuance of a stop order would mean that no shares of the company could be traded until the agency considers that deficiencies have been addressed. Reed Brodsky, partner at law firm Gibson Dunn, is quoted by CNBC as saying that:
“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.”
Jake Zamansky of securities law firm Zamanksy LLC added that “the fact that the SEC division of enforcement is involved suggests they are considering securities fraud action against the firm,” CNBC reports.
As Cointelegraph previously reported, Blockchain Riot had already received an a SEC subpoena April 9, which the firm had brushed off at the time, saying that “many companies engaged in blockchain and cryptocurrency businesses have received subpoenas from the SEC.”
CNBC’s report notes that the April subpoena related to matters that included “the proper asset classification, applicability of the Investment Company Act [of] 1940, to the Company’s business and affairs and accounting treatment of its cryptocurrency.”
Shares of Blockchain Riot reportedly dropped by over 12 percent on Wednesday, CNBC notes.
This March, the SEC embarked on a widely publicized crypto probe, after chairman Jay Clayton pledged to increase scrutiny into firms that seek to “capitalize on the perceived promise” the blockchain buzz.