SEC

SEC Halts Trading In Three Crypto-Linked, “Penny Stock Companies”

SEC Suspends Trading In Three “Penny Stock Companies”

The U.S. Securities & Exchange Commission (SEC) has suspended trading in three companies due to concerns about their crypto and blockchain related investments. These companies include Cherubim Interests (CHIT), PDX Partners (PDXP), and Victura Construction (VICT). All three of them issued press releases in January stating that they acquired thousands of trust units in the “NVC Fund”, a private equity fund with crypto-related investments. Cherubim went a step further by announcing it would be launching an ICO.

After halting trading in these companies, the SEC warned investors about businesses associating themselves with crypto-related technology just so that their share prices go up. Michele Wein Layne, Regional Director of the SEC’s Los Angeles office, stated that investors should be particularly wary of “penny stock companies that have switched their focus to the latest business trend, such as cryptocurrency, blockchain technology, or initial coin offerings.

CEO Of Targeted Companies Denies Making “False Claims”

American regulators such as the SEC have the authority to halt trading for up to 10 days during which they may conduct their investigation. Additionally, U.S. federal regulators can stop brokerage firms from engaging in activities related to particular stocks until specific reporting requirements have been completed.

In response to this suspension, the CEO of all three companies, Patrick Johnson, confirmed that trading had been stopped until March 2nd. He then asserted that “We haven’t made any false claims about anything that we have put out”. Mr. Johnson, who’s also a former University of Oregon football player, said that he was surprised by the SEC’s actions. However, he mentioned that he would provide the SEC with any information that it asks for.

SEC chairman Jay Clayton has already issued a warning to investors about businesses changing their names for the sole purpose of driving up their share prices. Mr. Clayton seems to be most concerned about fraudulent schemes being orchestrated under the guise of ICOs.

Not Easy To Contact Johnson’s Companies

CNBC attempted to contact Mr. Johnson, but was unable to get an immediate response. Phone numbers provided by PDX Partners and Victura’s official websites were out of service, according to CNBC. Strangely, Cherubim’s listed number played a machine recording for Victura while an email sent to Victura bounced back.

Notably, financial data company FactSet reported that the market capitalization of each of the three companies is below $5 million, and the value of their share prices was $0 on Friday. Cherubim Interests Inc. claims to specialize in alternative construction projects and real estate. Meanwhile, Victura, which is listed as a subsidiary of Cherubim, identifies itself as a holding company for the construction business and PDX Partners claims to be a telecom company that also makes iPhone apps.

Wildly Outrageous Claims

More than likely, SEC has targeted these companies due to their outrageous claims. For instance, Mr. Johnson said in January that his company, PDX Partners, acquired $350 million worth of assets from NVC Fund Holding Trust. NVC Fund’s portfolio includes “cryptocurrency and business financial services”. Given the extremely low market capitalization of all three of his companies, it seems highly unlikely that he would have the financial resources to make such large investments.

Sooner or later, the truth will come out and what we can learn from this is that it’s always best to not buy into the hype. Instead, anyone planning to invest in crypto-related initiatives, or any business for that matter, should perform thorough research before investing. This may take up a lot of time, but it will probably be well worth it, considering it could potentially save you from losing all your money to a malicious scam.