The Securities and Exchange Commission has added fraud charges to its previous charges against Longfin Corp., a defunct company that used to promote cryptocurrency and went public under dubious circumstances.
The SEC filed a fraud action Wednesday against both Longfin and its CEO, Venkata Meenavalli, who it alleged conducted a fraudulent public offering of shares in the company. According to the complaint, Meenavalli had falsely represented in SEC filings that his company was mostly managed and operated in the U.S. when, in reality, Longfin’s operations, assets and management were all located offshore. He and other officials at the company allegedly distributed over 400,000 shares of Longfin to insiders and affiliates to meet some of Nasdaq’s criteria for listing a company, without getting paid for any of the shares. He and a Longfin consultant were accused by the SEC of misrepresenting to Nasdaq the number of qualifying shareholders and shares sold during the IPO.
The SEC complaint alleged that Longfin and Meenavalli engaged in accounting fraud, recording more than $66 million in sham revenue, representing close to 90 percent of the company’s total reported revenue for 2017. Longfin voluntarily delisted from the Nasdaq in May 2018 and shut down last November.
In parallel with the SEC charges, the U.S. Attorney’s Office for the District of New Jersey also filed related criminal charges against Meenavalli. Meenavalli and Longfin did not immediately respond to requests for comment.
“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,” said Anita Bandy, associate director of the SEC’s Division of Enforcement, in a statement. “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 SEC had filed previous charges against Meenavalli, the company and several other officials accusing them of illegally distributing and selling more than $33 million of Longfin stock in unregistered transactions. Three of them have agreed to settlements to resolve the SEC charges, and those are now subject to court approval.
