The United States Securities and Exchange Commission (SEC) files fraud charges against supposed cryptocurrency firm Longfin Corp and its CEO Venkata S. Meenavalli, as per a press release on June 5.
The complaint was filed by SEC in the federal district court of Manhattan, New York. As per the filing, Longfin has allegedly fabricated 90% of its revenue and sold over 400,000 shares of Longfin, for which the firm does not have the funds to back, so as to secure its spot on the Nasdaq.
In 2017, Longfin observed a massive jump in its share price, after the firm claimed of redirecting its business model toward blockchain technology. Anita B. Bandy, the associate director of the Division of Enforcement, summarized the allegations as such:
“In our complaint against Longfin and Meenavalli and our amended complaint against Altahawi, we allege a multi-pronged fraud involving fake revenue, misrepresentations to the SEC, and false statements to Nasdaq.”
The complaint further notes that the SEC granted an A+ to Longfin’s Regulation based on the supposition that the company was principally managed and run out of the U.S., when in actuality the company’s operations, assets, and management were all offshore.
The SEC complaint also accuses consultant Andy Altahawi of reporting the fraudulent number of qualifying shareholders and shares sold in Longfin’s public offering to Nasdaq. On June 5, the U.S. Attorney’s Office for the District of New Jersey that it is pursuing criminal charges against CEO Meenavalli.
The SEC also accused Meenavalli of insider trading in the amount of more than two million unregistered, restricted shares to consultant Amro Altahawi, as well as five-figure quantities of restricted shares to individuals Dorababu Penumarthi and Suresh Tammineedi.
As per the commission, defendants have allegedly boosted their stock price fraudulently, releasing a misleading statement about acquiring an alleged crypto business, and quickly sold their shares at the pumped-up price. The SEC reportedly pursued penalties including disgorgement via Section 5 of the Securities Act of 1933, pertaining to ill-gotten profits.
In April 2018, the SEC has charged Longfin and CEO Meenavalli with securities fraud and froze over $27 million in Longfin trading profits.
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