Firm That Saw Stock Boost After Crypto 'Pivot' Hit With New SEC Charges

The SEC filed fresh fraud charges against Longfin Corp. on Wednesday, alleging the company falsified its accounting. Longfin's stock price jumped after it announced a crypto pivot in 2017.

AccessTimeIconJun 5, 2019 at 8:30 p.m. UTC
Updated Sep 13, 2021 at 9:16 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The U.S. Securities and Exchange Commission (SEC) filed new charges against fintech company Longfin Corp. and its CEO, Venkata Meenavalli, alleging that the company committed fraud when it claimed to bring in more revenue than it had in order to secure an exchange listing for its shares.

According to a press release Wednesday, the SEC is accusing Longfin, whose share price jumped some 2,000 percent in 2017 after announcing a blockchain pivot, of falsifying its revenue and fraudulently getting the company listed on the Nasdaq exchange. The charges come on top of previous allegations of illicitly distributing unregistered shares, which previously resulted in a preliminary injunction.

"The complaint alleges that Longfin and Meenavalli obtained qualification for a Regulation A+ offering by falsely representing in SEC filings that the company was principally managed and operated in the U.S. when, in fact, the company’s operations, assets and management remained offshore," according to the filing.

The company and its CEO also allegedly distributed 400,000 shares to insiders and affiliates without actually selling these shares, simply to meet listing criteria for the Nasdaq.

What's more, Longfin consultant Andy Altahawi allegedly "misrepresented to Nasdaq" how many shares were sold, and how many shareholders existed.

In addition to the fraudulent shares allegation, Longfin reportedly inflated its inflow, "recording more than $66 million in sham revenue."

In a statement, SEC associate director of the Division of Enforcement Anita Bandy said "we allege a multi-pronged fraud involving fake revenue, misrepresentations to the SEC, and false statements to Nasdaq,” adding:

 “Today’s filings reflect the work of a dedicated SEC staff who, after moving swiftly on behalf of investors to freeze assets last year, continued investigating to uncover the alleged fraud.”

The company shut down in November 2018.

The SEC has previously accused Longfin of issuing more than 2 million restricted shares to several individuals, who in turn sold these shares to collectively make more than $27 million in profits.

that “The SEC has shown that it is likely to prove at trial that these defendants participated in an unregistered, illegal public offering of the stock of Longfin Corp.”

SEC image via Shutterstock

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.