Trading in QMMM Holdings was stopped by the SEC after concerns were raised that the company had engaged in possible market manipulation in connection with its efforts to transition to cryptocurrency holdings. The trading suspension began on Monday and will remain in effect for 10 trading days.
According to the SEC notice, QMMM stock might have been manipulated by unidentified people through online promotions. The SEC said that the suspicious activity involved social media recommendations arranged in a manner that artificially inflated the price and volume.
The value of QMMM stock increased by almost 1800% in recent weeks, rising from $11 to $207 in one day, following the company's announcement of its intention to pursue a crypto treasury approach.
The company also disclosed an analytics platform with $100 million in funding that increased buying interest. Despite the volatility, QMMM last traded at $119.40, which is way above its $6.50 level from a month ago.
The SEC suspension notice follows reports that the organization and the Financial Industry Regulatory Authority (FINRA) are investigating several firms that employ similar strategies. Regulators are investigating whether companies or individuals used stock promotions or released nonpublic information in an attempt to take advantage of sharp price movements.
Crypto treasury transfers have become increasingly popular, with over 200 companies announcing their plans to store Bitcoin, Ethereum, or Solana in recent months. Although the announcements have been known to drive up stock prices, analysts caution that the trend exposes smaller firms to balance sheet risks in the event that digital asset prices fall.
Crypto-linked strategies are now beginning to show signs of strain. Stock price declines have prompted several companies to rely on debt-financed share repurchases, which has caused concern among investors about long-term sustainability.
Some of the more notable examples include the rebranding of Ethereum to ETHZilla, formerly 180 Life Sciences, which saw its shares fall by 76%. To fund a $250 million buyback, the company took on $80 million in debt. Empery Digital, formerly Volcon, has $476 million in Bitcoin but has a $378 million market cap, proving the disconnect.
K33 research finds that one out of four public companies with Bitcoin now trade at valuations lower than the value of their holdings. The increasing NAV gap is causing pain for smaller players, with companies like NAKA losing over 90% of their market value in recent months.