Chinese Stock Exchanges Crack Down on “Blockchain” Companies
Chinese companies are traditionally very ingenious and quickly go over the top to explore new opportunities. As blockchain technology reaches mainstream attention, more and more companies are trying to capitalize on this new tech opportunity. Oftentimes, it is done by releasing misleading or speculative information with the intention of attracting investors, or as a way of inflating their share prices.
These types of activities are now concerning regulators as this seems to be the case with a few Chinese companies. Zhejiang Enjoyor Electronics Co., Ltd., a Shenzhen listed engineering company, is one of the companies being targeted by Chinese officials and the Shenzhen Stock Exchange.
Speculation Raises Suspicion
According to China Money Network, the company came under the radar of the Shenzhen Stock Exchange after it posted on WeChat that an affiliate company had agreed to launch a “blockchain” project with Zhegjiang’s forensic sciences center. Per the agreement, the post stated that the companies would be launching the very first blockchain-powered electrical data forensic certificate. Soon after the announcement, Enjoyor Electronics shares shot up by 10%.
The quick spike in the share’s price alerted the Shenzhen Stock Exchange, which responded by demanding that the company explain and provide more details about its latest post. In addition, the Exchange asked the company to clarify if it was using the blockchain-related WeChat announcement to speculate and mislead investors with fake information.
The Exchange also told Enjoyor Electronics to reveal the number of shares it holds, and more concrete details which would prove the authenticity of the “blockchain” deal. As part of the proof, more verifiable information was requested about its blockchain-based forensic procedure. Finally, it asked for the company’s main financial figures. Notably, the Shenzhen Stock Exchange’s investigative approach resulted in the WeChat post being deleted.
An Increasing Trend
Many other companies are following the same disturbing trend. According to several reports, over 20 listed companies have been approached by both Shanghai and Shenzhen Stock exchanges with similar requests and are now under scrutiny.
Shenzhen Stock Exchange had already brought the subject to the attention of investors in a WeChat post back in January. The exchange stressed that many companies were associating themselves with blockchain and not actually implementing any services or products that used it. Therefore, it was targeting companies and closely monitoring them. As reported by China Money Network, it pointed out:
“Companies that use blockchain to speculate and mislead investors will receive disciplinary punishment, and severe violations will be reported to the China Securities Regulatory Commission.”
The Shanghai Stock Exchange also made a similar announcement shortly after. It said that it was keeping an eye on 10 Shanghai Exchange-listed companies that it believes could be making false claims about their involvement with blockchain. It then left a warning for investors reminding them of the dangers of speculative investments. The exchange also adopted strict and preventive measures by imposing trading restrictions and demanding companies to clarify their blockchain businesses operations.