The business intelligence software firm's stock was already declining in value along with the price of bitcoin, which also fell more than 10 percent on Friday to its lowest since August, CNBC reported. For the week, MicroStrategy's shares were off by 24.7 percent.
According to a filing released on Thursday, the SEC rejected the accounting methods that MicroStrategy was employing for bitcoin in the firm's earnings reporting.
“We note your response to prior comment 5 and we object to your adjustment for bitcoin impairment charges in your non-GAAP measures,” the filing noted. “Please revise to remove this adjustment in future filings.”
The outlet continued:
MicroStrategy began buying bitcoin as part of a capital allocation strategy in 2020, setting it apart from other companies. It has been aggressively buying bitcoin ever since, making its shares a proxy for the cryptocurrency.
As of the end of 2021, MicroStrategy held 124,391 bitcoins, acquired for roughly $3.75 billion at an average price of about $30,159 per bitcoin, CEO Michael Saylor announced on Twitter at the time.
MicroStrategy has purchased an additional 1,914 bitcoins for ~$94.2 million in cash at an average price of ~$49,229 per #bitcoin. As of 12/29/21 we #hodl ~124,391 bitcoins acquired for ~$3.75 billion at an average price of ~$30,159 per bitcoin. $MSTRhttps://t.co/tNxDwaT8VD
— Michael Saylor?? (@saylor) December 30, 2021
There have been concerns about massive fraud both inside and outside of the crypto industry for years.
In 2018, Natural News reported that bitcoin prices appeared to have been at least partially inflated by Bitfinex, a cryptocurrency exchange that was accused at the time of artificially propping up the price of bitcoin via the issuance of its own private cryptocurrency, known as “Tether.”
At the time, Natural News noted, the Commodity Futures Trading Commission (CFTC) subpoenaed Bitfinex in December 2017 following reports that the issuance of Tether was being used by some to increase bitcoin prices. According to the report, some were suggesting that customers of the exchange bought into Tether just to trade it out right away for bitcoin since Tether was backed by U.S. Federal Reserve Notes (FRNs).
According to the filing, the scheme worked like this: "Whenever investors hand over cash to Bitfinex, they’re automatically awarded an equal number of digital Tether tokens – one dollar equaling one Tether token. Because they’re supposedly back by U.S. dollars, these Tether tokens are said to hold inherent value that allows them to be traded for other things, including Bitcoin purchases," Natural News reported.
And while there isn't anything wrong with that practice, the problem then appeared to be the same as the one the SEC has with MicroStrategy: Questionable accounting practices that may be shielding activity that is illegal or improper.
As for Tether, a class-action lawsuit filed last month in U.S. District Court of Southern New York, claimed that the stablecoin is engaged in “immoral, unethical, oppressive, and unscrupulous” business practices, with plaintiffs Matthew Anderson and Shawn Dolika charging that Tether isn't really backed 1:1 by the dollar.
The company immediately responded to the suit, saying that “shameless money grabs, for which this lawsuit is a textbook example, will never be dignified by way of paying one Satoshi in a settlement: -- one Satoshi being the smallest bitcoin increment.
The class action was the latest legal predicament for Tether. In February 2021, New York Attorney General Letitia James ordered Tether and issuer Bitfinex to stop all trading and to pay up to $18.5 million in fines. And in October of last year, the CFTC imposed a $41 million fine for Tether and a $1.5 million fine for Bitfinex over shady business practices, Natural News reported.
It seems that the best idea moving forward is to just keep old-fashioned money as our currency of choice rather than cryptocurrency whose value can obviously be manipulated in ways most people don't understand.