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Tightening The Noose: SEC Sends Subpoenas to Crypto Firm “Riot Blockchain”

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The US Securities and Exchange Commission has sent a subpoena to Riot Blockchain, a Nasdaq-listed firm that became the focus of the media last year after it turned to offering cryptocurrency-related services. The firm announced the news in its annual report on Tuesday.  

In the report, Riot discloses that it received the SEC subpoena on April 9th requesting certain information. The report says that the company will fully cooperate with the SEC’s requests. The report also says that the firm believes the subpoena has something to do with its recent move into the blockchain and cryptocurrency business.

“As part of its review of the Company’s public filings, the Securities and Exchange Commission…has inquired about certain of the Company’s assets’ classification as, and amount of, possible Investment Company assets,” explained elsewhere in its filing, adding: “The Company intends to fully cooperate with the SEC request”, reads part of the report by the company’s chair John O’Rourke.

Riot, which emerged in October from the remains of former biotech company Bioptix, has seen its popularity rise with the new cryptocurrency name. Similar to the rise of Bitcoin, Riot’s shares hit a 52-week high of $46.20 by December, though its stock price was down to $7.30 as of Tuesday.

The company has since made multiple cryptocurrency-related acquisitions, including buying Bitcoins and Bitcoin mining equipment.

Riot, who say they has nine full-time employees, also faces getting kicked off the Nasdaq exchange if they don’t have an annual shareholder meeting, which Riot now says will be on May 15th, according to the filing.

However, in a separate news release the chair remained optimistic, saying,

We continue to focus on the expansion of our cryptocurrency mining operations and the active investigation of launching a cryptocurrency exchange in the United States.

Red Flags Unearthed

In February, CNBC reported a number of red flags in the firm’s SEC filings. Key among them were annual meetings being postponed at the last minute, insider selling soon after the name change and dilutive issuances on favorable terms to large investors. The report also showed that a key shareholder was leaving the company while everyone else was coming on board.

However the company was quick to dismiss the CNBC report, accusing the media company of publishing a negative, one-sided piece.

Following the damning report, it does not come as a surprise that the company has received the subpoena. The SEC Chairman, Jay Clayton, had warned that it was not right for companies with no meaningful track record in the crypto industry to enter the market, change their names andoffer investors securities straight away, without providing adequate disclosures about the risks involved.

The company had however warned investors that it does not expect to make profits in the near future, and as per the fillings, it has made a loss of $20 million.

Image Credit: Deposit Photos

Is the SEC justified to issue subpoenas to Riot? Let us know your thoughts in the comments section.

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