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.
A federal judge later ruled 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.”
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