US probes 200+ firms over crypto-treasury trading

U.S. regulators are investigating more than 200 companies with crypto treasuries over allegations of insider trading.

The Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) flagged suspicious trading activity before corporate crypto announcements.

Regulators observed unusual surges in trading volumes and sharp stock price gains just days before public disclosures.

Reports indicate that the probes target firms following aggressive crypto accumulation strategies inspired by MicroStrategy.

The SEC warned companies against violating Regulation Fair Disclosure, which prohibits selective leaks of nonpublic information.

Corporate practices require outside investors to sign non-disclosure agreements when funding large crypto purchases.

However, pre-announcement stock spikes suggest breaches of confidentiality may have occurred.

Regulators are concerned that the “flywheel” strategy amplifies risks when leaks occur.

The flywheel model relies on raising capital through debt or equity, often via convertible bonds.

This capital is then used to buy large amounts of crypto, driving stock prices higher.

Rising stock prices enable companies to raise more funds for additional crypto purchases.

The cycle creates a leveraged feedback loop vulnerable to insider trading.

Any early leak about capital raises or purchases can distort market conditions.

Investigators are examining whether certain investors gained unfair advantages from these leaks.

The probe reflects regulators’ heightened focus on corporate treasury use of digital assets.

Companies found guilty could face penalties or stricter compliance requirements.

The scrutiny highlights mounting risks tied to corporate adoption of crypto.

Analysts warn that ongoing investigations may influence how firms approach treasury strategies.