When compared to the "tried and true" - blue chip stocks, mutual funds, index funds, and bonds - cryptocurrencies are a bit of a gray area. Investing in cryptocurrency appeared even grayer on October 22 when the Securities and Exchange Commission (SEC) suspended trading for a public company that boasted of a fraudulent approval for their cryptocurrency business.
Monday October 22 seemed like any other start to the trading week until the news broke late in the morning that the SEC was suspending trading "in the securities of Nevada-based American Retail Group, Inc." (Source: "SEC suspends trading in company after false cryptocurrency-related statements", MarketWatch).
According to the Washington Examiner, American Retail Group, Inc. "acquired Simex, Inc. in May of this year and promptly changed its name to Simex while continuing to trade under the American Retail name." The SEC alleges that the company made misleading statements to give investors the impression that they had obtained SEC approval for a cryptocurrency offering.
In previous posts we have covered some of the potential risks facing people who choose to invest in cryptocurrency as well as the fact that the SEC is getting more aggressive in applying longstanding securities laws to the cryptocurrency market. The case of Simex/American Retail Group is an example of the latter.
There are gray areas in cryptocurrency, but this was not one of them. Making false or misleading statements will always run the risk of result of attracting unwanted attention from the SEC. If you find yourself on the wrong side of such accusations it's important to have a firm a proven track record of successful regulatory defense.