SEC Investigation Into Riot Blockchain’s ‘Unclear’ Registration Statements Are Not Yet Over
SEC’s Investigation Into Riot’s ‘Unclear’ Registration Statements Not Yet Over
Riot Blockchain has stated that the current probe by the US investigation panel into its registration documents is not yet over.
The US Security and Exchange Commission, SEC, which is primarily responsible for regulating the securities industry, started a probe into the activities of Riot following the latter’s registration shortly after dabbling into stock market.
Riot started out as a biotech company as Bioptix, Inc. (Nasdaq: RIOT) but made its investment diversification into the crypto exchange in the last quarter of 2017.
During the period, Riot Blockchain entered into an ultimate contract with mining hardware giant Bitmain to acquire cryptocurrency mining equipment. The equipment consists of 700 AntMiner S9s and 500 AntMiner L3s.
According John O’Rourke, President of Riot Blockchain,
“The plan was to leverage the mining technology and take advantage of the blockchain opportunity, with a view to “accumulating bitcoin” in the process.”
Sequel to its registration, the SEC started a probe, explicitly targeting a clear explanation of the particulars enclosed in the registration statements presented by the company board.
Even more, is the SEC’s concern that the company engaged in an alleged pump-and-dump scheme. This suspicion spurred the US regulators into action, demanding the company to clear the air on the details of the three listing statements.
Meanwhile, in October, the company backtracked, announcing that it has withdrawn one statement from the SEC and has since made some amendment to it, while terminating the other two statements.
Consequently, there was a skyrocket in Riot’s share price which moved from a low $5 per share to almost $50 within a few days.
While the popular feeling has been that the amendment has ended SEC’s investigations into Riot’s activities, latest development indicated that the company is still very much under the scrutiny of the Securities and Exchange Commission.
Riot Blockchain’s latest quarterly regulatory reports reveal that it is in talks with some top officials of the Commission in a bid to see to their concerns and cooperate as they long to conclude.
The issue has got Riot into some revenue generation trouble waters. According to its latest quarterly filing, Riot reported that while it did generate $2.8 million in revenue it made, it also lost $24.4 million in the second quarter.
Its quarterly report in May showed that the company generated a revenue of $1 million in the first quarter -specifically from January to March.
Since then, there has been some downward trend in revenue falling from $1.7 million cash at the end of the second quarter to $1.6 million as of September 30.
Its two most recent reports also showed that Riot has recorded a loss of $41.7 million since December, 2017.
Interestingly, the diversification into the cryptocurrency powered technology may not have been directly responsible for the SEC’s recent investigations. Rather, it appears the company did not do its due diligence in the process of foraying into the digital exchange market.
Also, Riots is not the first company to be investigated by the SEC for crypto related activities. Last year, the US securities regulator gave another company dabbling into cryptocurrency trading a warning and a slap on the wrist following some regulatory irregularities that were linked to it.
SEC temporarily halted trading in shares of CIAO Group, giving reasons of concerns over the company’s planned launch of its initial coin offering (ICO). The SEC also halted Kodak ‘KashMiner’ bitcoin mining operations in July due to a regulatory breach in its activities.
Riot Blockchain board will be expected to iron out all concerns raised by the SEC in respect of its registration statement so as to salvage its rapidly eroding reputation.