Longfin Corp. and its CEO Venkata Meenavalli were recently accused of fraud by the U. S. Securities and Exchange Commission (SEC). According to the SEC filing, the company committed fraud because it lied when it affirmed that it had way more revenue than it actually had at the time.
This impacted the price of its stocks, which went up after the fake announcement. According to the information present in the press release, Longfin has seen the price of its shares go up at least 2,000% back in 2017.
At this time, the company announced a “blockchain pivot” and it frauded some information about its revenue in order to be listed on Nasdaq, which led to the price boost. This is not all, however. The company is also accused of distributing unregistered shares of its stocks as well, which is also illegal.
The filing describes the complaint. According to it, the CEO got a Regulation A+ qualification by lying and affirming that the company was mostly operated within the boundaries of the United States. Not even this was true. Most of the operations were actually offshore.
One of the main pillars of the scam was that the company distributed 400,000 shares without actually ever selling them at all. They simply distributed them to key personal such as market insiders and affiliates. This way, the company was able to falsify the information that was sent to Nasdaq.
Even the consultant of the company, a man called Andy Altahawi, was accused of misrepresenting how many shares were actually sold and how many shareholders the company actually had.
You will probably not be surprised to discover that there were even more irregularities than these ones we cited so far. Longfin inflated its inflow a lot, affirming that it had a revenue of $66 million USD when the real revenue was considerably lower.
A Huge Scam
There is no doubt that this company was involved in a very big scam. In fact, the SEC associate director Anita Bandy, which is from the division of enforcement of the entity, called this a multi-pronged fraud full of false statements and fake revenue declarations.
She commended the SEC for being so swift in its actions and affirmed that the assets of the investors were frozen last year for investigations, so they were protected when the company was shut down in 2018.
The situation definitely does not look very good for the scammers as the SEC is accusing them of issuing over 2 million restricted shares in order to profit over $27 million USD in a completely illegal way.
As you may know, the case is far from over, but mostly because these operations take a long time. The SEC has a very strong case here. Even a federal judge affirmed last year that the SEC had proof that the defendants were selling illegal assets, so they will probably be taken down the hard way now.