Riot Blockchain receives SEC subpoena
The company will cooperate but expects to continue to incur losses from operations over the short-term.
The US Securities and Exchange Commission (SEC) has subpoenaed cryptocurrency company Riot Blockchain.
Riot Blockchain’s Form 10-K, part of the company’s annual report to the SEC, revealed that it had received a subpoena on April 9 “requesting certain information”. Riot intends to “fully cooperate with the SEC request”.
The company has notified its insurance carrier, although there can be no assurance that the costs of compliance with the subpoena or any related matters will be eligible for insurance coverage… many companies engaged in blockchain and cryptocurrency businesses have received subpoenas from the SEC which presents an additional industry risk. The existence of an investigation of the company specifically and the industry generally could have a materially adverse effect on the company, its business or operations, and the industry as a whole.
Riot Blockchain on the financial consequences and business implications of the SEC’s subpoena
“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. We see a strong integration opportunity of supply and demand between our mining operation and a potential exchange,” Riot Blockchain chairman John O’Rourke said in a media statement pertaining to the company’s annual report and latest financial results.
In late 2017 research tools company Bioptix, engaged in veterinary and life science-oriented businesses, changed its name to Riot Blockchain and began pursuing a blockchain and digital currency business model. This was initially achieved through investments in existing companies, according to Riot’s annual report filing.
Stock in the company soared from around $8 per share to more than $40 over a very short period of time.
“SEC Chairman Jay Clayton warned that it is not acceptable for companies without a meaningful track record in the sector to dabble in blockchain technology, change their name and immediately offer investors securities without providing adequate disclosures about the risks involved. As a result, we could be subject to substantial SEC scrutiny that could require devotion of significant management and other resources and potentially have an adverse impact on the trading of our stock,” Riot Blockchain’s stated in the company’s 10-K submission.
Riot expects to “continue to incur losses from operations for the near-term” and that these losses could be “significant” due to costs and expenses associated with operations and new business development.
The company plans to continue its expansion of cryptocurrency mining operations, evaluate opportunities for investments in the blockchain and digital currency sector, explore financing, investigate the launch of a digital asset exchange in the United States and monetize and license company assets for further gains.
“This strategy, like our prior ones, may not be successful, and we may never become profitable,” Riot said.
Last week, the United States’ Nasdaq Stock Market officially delisted controversial company Long Blockchain. As a result, trading of company shares was suspended on the Nasdaq Capital Market at the open of business.
Earlier this month, the SEC filed a court order against purported blockchain company Longfin Corp, freezing more than $27 million in trading proceeds. Longfin’s stock soared 2000% in December after the company announced it was buying a blockchain business. The stock price rose to more than $70 late last year.
In April, the SEC also charged an initial coin offering (ICO), Centra Tech, and its co-founders with fraud, after the startup raised more than $32 million from thousands of investors in 2017.
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