SEC LongFin investigation: New fraud charges against LongFin management

June 11, 2019, | AtoZ MarketsThe U.S. Securities and Exchange Commission (SEC) has filed additional charges against the CEO of the Fintech company Longfin. The SEC alleges that Venkata Meenavalli falsified nearly 90% of Longfin’s revenue and fraudulently secured the company’s public listing.

About Longfin previous case in a brief

The new SEC complaint against Venkata Meenavalli comes just a year after the same authority charged him with illegally distributing shares in Longfin after it went public through a Regulation A+ “mini-IPO.” Regulation A+ is an alternative to a traditional initial public offering (IPO). Which enables early-stage companies to raise funds from the general public, not just accredited investors. 

According to the SEC, Longfin obtained the aforementioned qualification by falsely representing in SEC filings. Longfin said that it was principally operating in the United States. However, in reality, Longfin operations, assets, and management remained offshore.

In April 2018 the court ordered to freeze the proceeds from trading operations worth more than $ 27 million, from the illegal distribution and sale of restricted shares of Longfin Corp.

Back then the charges were brought to the company, its CEO Venkata Meenavalli and three other affiliates. Shortly before the judge unsealed the SEC’s complaint, the Nasdaq Stock Market halted trading in Longfin’s stock. The company halted its business permanently in November of 2018.

New details of the SEC LongFin investigation

The new SEC complaint against Longfin alleges in part that Meenkavalli engaged in a fraudulent scheme to meet the criteria for a Nasdaq listing.

The US financial regulator said that Longfin and Meenavalli recorded more than $66 million in sham revenue. SEC LongFin investigation shows that nearly 90% of the company’s total 2017 reported revenue were sham revenue.

According to the SEC, Meenavalli allegedly distributed more than 40,000 shares to insiders and affiliates. In order to create the false appearance of having a sufficient investors to proceed with a public listing.

Longfin news followed the SEC action against Kik

Last week the U.S. Securities and Exchange Commission SEC filed a complaint to the court of New York on messenger app maker Kik for it’s $100 million ICO. The regulator suspected company of not registering its KIN token sale, which violates federal securities law. Kik CEO Ted Livingstone noted last month that the company has already spent $ 5 million on cooperation with the SEC. However, Stephen D. Palley a partner in the Washington D.C. office of Anderson Kill said that SEC strong complaint does not necessarily mean that the case will proceed to a jury trial.

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