SEC Files Fraud Charges Against Cryptocurrency Firm Longfin

The U.S. Securities and Exchange Commission (SEC) filed new charges against the now-defunct cryptocurrency firm Longfin Corp. and its CEO for falsifying the company’s revenue and for fraudulently securing the company’s listing on the Nasdaq.

Longfin’s share prices boosted in 2017 after releasing a misleading statement about acquiring an alleged crypto business, and quickly sold their shares at the pumped-up price. The the United States Securities and Exchange Commission (SEC) reportedly pursued penalties via Section 5 of the Securities Act of 1933.

In its charges filed in federal district court in Manhattan, SEC alleged that Longfin and its CEO, Venkata S. Meenavalli, conducted a fraudulent public offering of Longfin shares after obtaining qualification for a Regulation A+ offering. This was done by falsely representing in SEC filings that the company was mainly managed and operated in the U.S. while the company’s operations, assets and management remained offshore.

Longfin then distributed more than 400,000 shares to insiders and affiliates to meet certain Nasdaq listing criteria, without obtaining payment for any of these shares.

Along with its consultant Andy Altahawi, Longfin misrepresented to Nasdaq the number of qualifying shareholders and shares sold in the offering, SEC alleges in the complaint. It also alleges that Longfin and Meenavalli engaged in an accounting fraud, recording more than $66 million in sham revenue, representing nearly 90 percent of Longfin’s total 2017 reported revenue. Longfin voluntarily de-listed from Nasdaq in May 2018 and shut down in November.

In a parallel action, the U.S. Attorney’s Office for the District of New Jersey announced related criminal charges against Meenavalli.

More than $27 million in illegal trading proceeds from unregistered distributions of Longfin stock is already frozen on the basis of SEC’s earlier charges against the company.

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