A Chinese company is under investigations by the country’s market regulator after its stock shot up on the back of blockchain links. Great Wall Group has focused on porcelain for decades now, but in its financial filing last year, it announced that it was delving into blockchain. With China looking set to embrace blockchain, investors have descended on its stock in the past week and this has caught the watchful eye of the regulator.
Founded in 1996, the company has been involved in the research, design and production of art ceramic products. It also engages in education projects. However, in its 2018 financial filing, it revealed details about six blockchain projects that it was undertaking. At the time, it didn’t cause much of a stir in the market. All this changed when China’s president Xi Jinping called for the integration of blockchain recently.
Great Wall’s stock on the Shenzhen Stock Exchange soared for five consecutive days last week, becoming one of the most sought-after stocks in the exchange. This caught the eye of the China Securities Regulatory Commission (CSRC) which launched an investigation into the firm, a report by CoinDesk has revealed.
In its filing with the Shenzhen Stock Exchange, the company stated, “According to the Securities Law of the People’s Republic of China, the committee of CSRC has decided to open an investigation against the firm.” The regulator is investigating potential violations of information disclosure regulations.
The stock exchange’s board has also sought to find out more information about Great Wall’s blockchain projects. In a filing on October 28, the board, known as ChiNext, required the firm to explain how its businesses are related to blockchain technology. It also inquired on the projects’ backgrounds, amount of investment and the target market. Additionally, it asked the firm to disclose how much profits it had generated from its blockchain ventures and whether they have affected the company’s overall profitability.
In its response, Great Wall indicated that two of its six blockchain projects were developed by its Internet training subsidiary, Zhiyou Education. The company hopes to launch a cryptocurrency project which will be known as OK Angel Coin. The other four projects are being developed by its recently-acquired education subsidiary, Emerald Education Group.
The Chinese regulators are right to be concerned about the sudden blockchain pivot by the company. This trick has been used by other companies elsewhere, including blockchain projects so as to boost their stocks and get more investors. One of these is Long Island Tea Corp which changed its name to Long Blockchain Corp. This immediately boosted its stock prices by over 1,000% in days. Riot Blockchain also pulled off a similar stunt, with the two companies being investigated by the FBI and SEC respectively.
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