- The CEO is accused of falsifying public offering records
- SEC says the $66 million claim was made to attract investors
- The three accused have agreed on a settlement for another case
The United States’ Securities and Exchange Commission (SEC) has filed fresh charges against LongFin Corp and its Chief Executive Officer. LongFin saw a massive jump of 2500 percent in its share price in 2017 after claiming it had redirected its business model towards blockchain technology.
Fresh off another suit the U.S. Securities and Exchange Commission filed against Kik, the SEC claims in a press release on June 5, 2019, that LongFin and its CEO Venkata Meenavalli organized a falsified Regulation A+ public offering of the Fintech Company’s shares by providing false information in the filings submitted to the regulator.
Scheme to Secure Its Spot on the Nasdaq
The SEC filed its complaint in the federal district court of Manhattan, New York.
As per the charges, Meenavalli committed accounting fraud when he recorded over $66 million in false revenue. SEC alleges that Longfin fabricated 90 percent of its revenue and sold over 400,000 shares of LongFin, that it did not have the funds to back, in a scheme to secure its spot on the Nasdaq. According to Anita B. Brandy, SEC’s associate director of the Division of Enforcement, the regulator’s allegations against LongFin can be summarized:
“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 […] 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.”
According to New Jersey-based U.S. Attorney Craig Carpenito, more than $66 million of revenue that made LongFin shares look more attractive to investors should never have been recognized. The fintech firm based in New York and branch offices in Lyndhurst, New Jersey, closed shop last November.
Agreed To a Settlement
A default judgment was entered in January against Meenavalli in a related U.S. SEC civil case filed in April 2018 against him, LongFin and three associates. The SEC won a court order to freeze $27 million of trading proceeds after accusing Veenamalli of arranging the issuance of LongFin shares to Andy Altahawi, Dorababu Penumarthi, and Suresh Tammineedi, which were sold after the stock soared.
The SEC stated that the three defendants agreed to settle by paying fines with Altahawi paying a $2.9 million fine, return $21 million of alleged wrongful gains, and accept a five-year public company officer and director ban, and Penumarthi and Tammineedi will pay more than $1.7 million and $241,000, respectively. None of those defendants admitted or denied wrongdoing.
