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Suspension of Trading for Hong Kong Blockchain Firm

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Published On: January 17, 2018

Last week, on January 8, 2018, the Securities and Exchange Commission (“SEC”) suspended trading of UBI Blockchain Internet, Ltd. (“UBI”) stock until January 22, 2018.[1] UBI, formerly JA Energy, is a Hong Kong-based technology firm focusing on the Blockchain technology underlying cryptocurrency.[2] Coincidently, one of the focuses of this over-the-counter traded company is on the application of the distributed ledger technology to trace food and drug products from the producer to the consumer.[3] According to UBI’s legal counsel, the motivation behind this innovation is to prevent counterfeit products.[4]

The erratic behavior of UBI shares caught the eyes of the SEC in early December as the company’s stock sky-rocketed in price. On December 1, 2017, shares of UBI were trading at $6.12, and just eighteen days later, the value had swiftly rose to $83.00 per share, and even selling as high as $115.00 per share.[5] The subsequent decline in value was just as precipitous. Within a week of its peak, the value of UBI stock had fallen to $29.00 per share and further down to $22.00 per share before the close of the 2017 year. The freeze on trading allows the SEC an opportunity to investigate the causes of the sudden and drastic changes in the firm’s stock activity.

The SEC is tasked with closely monitoring the trading activity of publicly traded companies. Spikes in value and in the volume of trades within the market, like those seen here with UBI, raise red flags for the SEC to act upon. Pursuant to Section 12(k) of the Securities Exchange Act of 1934, the SEC may temporarily suspend the trading in particular securities pending an investigation.[6] In the case of UBI, the commission cited two distinct justifications for its suspension: concerns with (1) the accuracy of assertions dating back to September 2017 regarding the company’s business operations; and (2) the unusual and unexplained market activity in the company’s Class A common stock since November 2017.[7] It remains to be seen whether the cause of the fluctuation was caused by SEC violations or by a frenzy as the market responded to UBI’s pharmaceutical application of the Blockchain technology.

 


 

[1] U.S. Securities and Exchange Commission, Securities Exchange Act od 1934: Release No. 82452,  https://www.sec.gov/litigation/suspensions/2018/34-82452.pdf (last visited January 14, 2018, 3:05 PM).

[2] Matt Robinson, Crypto Stock That Surged 900% in 2017 is Hit With SEC Halt, Bloomberg (Jan. 8, 2018, 10:39 AM), https://www.bloomberg.com/news/articles/2018-01-08/crypto-stock-that-surged-900-percent-in-2017-gets-sec-suspension.

[3] Cory Johnson, How One Mysterious Startup is Riding the Bitcoin Wave, Bloomberg (Dec. 27, 2017, 12:17 PM), https://www.bloomberg.com/news/articles/2017-12-27/bedwetting-to-blockchain-how-one-startup-rode-the-bitcoin-craze.

[4] Id.

[5] UBI Blockchain Internet Ltd., Marketwatch, https://www.marketwatch.com/investing/stock/ubia/charts (last visited January 14, 2018, 3:07 PM).

[6] See supra note 1.

[7] See supra note 1.