SEC freezes $27 million in shares of public blockchain company Longfin
Longfin’s chief executive allegedly issued unregistered shares to nominees which were then sold to the public.
The United States Securities and Exchange Commission (SEC) has filed a court order against purported blockchain company Longfin Corp, freezing more than $27 million in trading proceeds from restricted stocks.
According to the SEC’s complaint, Longfin’s chief executive and controlling shareholder, Venkata Meenavalli, issued more than two million unregistered shares to Longfin corporate secretary and director Amro Izzelden Altahawi. Meenavalli also issued tens of thousands of restricted shares to two other individuals, Dorababu Penumarthi and Suresh Tammineedi, allegedly acting as nominees for Meenavalli.
Shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion. The SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi, and Suresh Tammineedi then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Altahawi, Penumarthi, and Tammineedi collectively reaped more than $27 million in profits.
SEC complaint unsealed in federal court this week
The complaint seeks injunctive relief, disgorgement of ill-gotten gains, and penalties, among other relief.
“We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” SEC Enforcement Division’s Cyber Unit chief Robert Cohen said. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”
Longfin’s stock soared 2000% in December after the company announced it was buying a blockchain business. The stock price rose to more than $70 late last year and is now valued at approximately $28, according to Google. NASDAQ suspended trading of Longfin Corp stock in order to seek “additional information requested”.
Earlier this week, the SEC charged an initial coin offering (ICO), Centra Tech, and its co-founders with fraud, after the startup raised more than $32 million from thousands of investors in 2017.
Following numerous proposals, US options exchange CBOE has urged the SEC to permit the advancement of cryptocurrency exchange-traded funds (ETFs) in the same way that commodity-related products are allowed.
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