Longfin CEO to Pay $400,000 After SEC Approved Fraud

On January 3 the United States Securities and Exchange Commission (SEC) reached a settlement in the long running fraud case against the CEO of Longfin. The SEC published this in an announcement stating that it has finally settled in a fraud case against fintech firm Longfin Corp.

Longfin’s CEO Venkata Meenavalli was ordered to pay $400,000 in disgorgement and penalties to resolve the SEC’s fraud action against him.

In June SEC claimed that Meenavalli attempted to get Regulation A+ offering by falsely stating that the firm is based in the US.

The firm also distributed more than 400,000 shares to ”insiders and affiliates”, which allowed to fake the number of shareholders and comply with the listing requirements of Nasdaq.

The SEC also claimed that Longfin’s $66 million in revenue were derived from commodities ”transactions” which in fact were ”sham, round-trip events” between the firm and its associates.

According to the reports from December 2017, Longfin’s shares gained more than 1000% after the news about the firm acquiring a cryptocurrency platform Ziddu with no market value. Back then Meenavalli was overwhelmed with that, saying, that this market cap is not justified, while his affiliates gave away their shares to investors unaware of the situation.

Suspicions surfaced when it turned out that Meenavalli also owns 95% of Ziddu’s parent company, and when SEC investigation started in April 2018, the stock value of the firm dropped by 30%.

$33 million recovered in total

The settlement agreed with Meenavalli includes his full salary while he was Longfin’s CEO ($159,000), prejudgment interest of $9,000, and $232,000 of civil penalty. He will also surrender all the Longfin’s stock and will never be allowed to hold positions of an officer or director of public company.

According to reports from September 2019, the district court for the Southern District of New York ordered the firm to repay $6.8 million in fines for the alleged fraud. In June 2019 SEC initiated a legal process regarding the alleged unregistered distribution and sale of Longfin stock, which resulted in more than $26 million in disgorgement.