An investigation has been launched by the Security and Exchange Commission into private stocks that have been illegally traded in the technology industry, reports The Wall Street Journal. The shares primarily come from major pre-IPO companies, like Snapchat and Uber, which have gained multi-billion dollar valuations.

Although companies like Snapchat and Uber are worth billions of dollars, they continue to maintain their private status and apparently this isn't stopping their company shares from being bartered on the market. The sales of these private shares alarmed regulators at the SEC, who under the Dodd-Frank Act of 2010 must approve sales of private stocks.

Since taking note of the private shares being exchanged in the tech industry, the SEC has begun investigating numerous firms who they allege have been offering derivatives in exchange for private equity owned by present or former employees of highly valued private tech companies.

Additionally, middlemen like hedge-fund manager Jonathan Sands have come under scrutiny for illegally attempting to sell private shares. In January, Sands was looking to raise $100 million from investors to purchase equity in Uber that he claimed was coming directly from the company. Uber denied the claim and demanded that he end his operations.

Since June 17, the SEC has been investigating Sand Hill Exchange, an online marketplace that makes it easy to buy and sell private equity in companies like Reddit, Snapchat, Uber and Zenefits. The SEC commanded Sand Hill Exchange to cease their operations under the suspicion that they've not sought approval from the SEC to sell private shares. Sand Hill Exchange didn't contest the charges and settled by paying a $20,000 fine.

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