The Securities and Exchange Commission (SEC) added new fraud charges against Longfin Corporation, its CEO Venkata Meenavalli.
Longfin claimed to be a fintech company that acquired a cryptocurrency company called Ziddu, which had no ascertainable value.
The Commission alleged that Longfin and Meenavalli falsified the companys revenue.
Meenavalli and a former Longfin consultant allegedly committed fraud to secure the companys listing on NASDAQ. The company allegedly conducted a fraudulent public offering of its shares.
SEC accused Longfin and its CEO of multi-pronged fraud
In its lawsuit, the SEC said Longfin and its CEO falsely represented in SEC filing that it is managed and operated in the United States to obtain qualification for a Regulation A+ offering. However, the Commission found that the companys assets, management and operations remained overseas.
The Commission alleged that Longfin and Meenavali engaged in a fraudulent scheme by distributing more than 400,000 shares of the companys shares to affiliates and insiders to meet certain NASDAQ criteria, without obtaining payment for those shares.
Additionally, the SEC alleged that Meenavalli and Altahawi misrepresented to NASDAQ the number of qualifying Longfin shareholders and shares sold in the offering.
Furthermore, the SEC alleged that Longfin and Meenavalli engaged in accounting fraud, recording over $66 million in sham revenue.
In a statement, Anita B. Bandy, Associate Director of the Division of Enforcement, commented, 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.
The SEC filed its complaint in the federal district court in Manhattan. The U.S. Attorneys Office for the District of New Jersey filed related criminal charges against Meenavalli.
Previous complaint against the defendants
Last year, the SEC obtained a court order freezing over $27 million of its trading proceeds from allegedly illegal distributions and sales of its restricted shares.
The Commission alleged that Longfin, Meenavalli, its secretary and director Izzelden Altahawi and two other affiliated individuals Dorababu Penumarhi and Suresh Tammineedi violated federal securities laws. They allegedly illegally distributed and sold over $33 million of Longfin sock in unregistered transactions.
Longfin voluntarily delisted from NASDAQ and shutdown in 2018.
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