Longfin’s Illegal Trading Was an Easy Catch for the SEC
The US Securities and Exchange Commission has gotten a court order to freeze $27M in trading proceeds because of allegations that restricted shares of Longfin Corp. (NASDAQ:LFIN) stock may have been illegally sold and distributed. The regulator’s complaint, unsealed in federal court early this month, contends that soon after the company started trading on the NASDAQ and made it known to the public that it was acquiring a purported cryptocurrency business, its stock price soared from $5 to $142 during the first three trading days, with market capitalization reaching over $3B, said the SEC. Barron’s, however, reports market cap reaching $6B. The SEC is charging Longfin CEO Venkata Meenavalli and Director Amro Izzelden “Andy” Altahawi, as well as Suresh Tammineedi and Dorababu Penumarthi, with violating the Securities Act of 1933.
According to the regulator, Altahawi, Penumarthi, and Tammineedi illegally traded and sold huge blocks of the restricted shares to members of the public while Longfin’s stock price was very high. As a result, the three of them collectively made over $27M. A lot of the trading hype seems to have come from the cryptocurrency and/or blockchain connection with the announced acquisition.
The SEC claims that Meenavalli, who is also the controlling shareholder of Longfin, was responsible for the issuance of over two million restricted shares, which also happened to be unregistered, to Altahawi, as well as the issuance of tens of thousands of restricted shares to Tammineedi and Penumarthi, who were allegedly serving as the CEO’s nominees. Tammineedi has business and company ties to Meenavalli, as does Penumarthi. The two of them are accused of selling more than $2.8M in unregistered Longfin stock.
Federal securities laws places restrictions on unregistered shares issued to company affiliates. Now, the SEC is seeking disgorgement of ill-gotten gains, injunctive relief, penalties, and other relief.
Also, earlier this month, the NASDAQ sent Longfin Corp. a letter notifying the company that it was not in compliance with the American Stock Exchange because it had failed to submit its Form 10-Q for the period concluding at the end of September. Trading in Longfin was indefinitely halted.
If you are investor that traded in Longfin securities and you wish to explore whether you may have grounds for a securities fraud claim due to their engagement in illegal trading, contact our securities law firm of Shepherd Smith Edwards and Kantas, LTD LLP today.
More Blog Posts from SSEK Law Firm:
Broker Fraud Allegations Lead to Finra Bars for Northwestern, Fortune Financial, and Morgan Stanley Representatives, Stockbroker Fraud Blog, March 24, 2018
Ex-Wells Fargo Broker Barred for Alleged $180K Elder Financial Fraud, Stockbroker Fraud Blog, February 26, 2018
SEC Accuses Broker of Giving Some Customers Preferential IPO Access in Exchange for Over $1M in Kickbacks, Stockbroker Fraud Blog, January 2, 2018
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