SEC Freezes Longfin Corporation Stock Sale Proceeds

The Securities and Exchange Commission continues to investigate the circumstances surrounding the massive sale of restricted shares of Longfin Corporation. Longfin is a NASDAQ (LFIN) listed firm specializing in emerging financial technology, or FinTech.

“Reimagining the world of Alternative Finance (Shadow Banking), $72 trillion industry powered by Artificial Intelligence, Machine Learning and Blockchain enabled Smart Contracts.” – Venkat S. Meenavalli, Chairman & CEO, Longfin Corporation

Utilizing an emergency order obtained in federal court on April 6, 2018, the SEC has frozen more than $27 million in trading proceeds. Allegedly, the stock sale proceeds were destined for an offshore location. The investigation stems from alleged illegal distributions and sales of restricted shares of Longfin. The parties involved include Longfin’s CEO and three other corporate stakeholders.

Longfin and Cryptocurrency Acquisition Hype

Just after announcing the acquisition of a purported cryptocurrency business, Longfin’s stock price rose dramatically. Its market capitalization reached more than $3 billion. Shortly thereafter, the SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi, and Suresh Tammineedi illegally sold large blocks of their restricted Longfin shares while the stock price was exceedingly elevated. The restricted share sale trade produced more than $27 million in profit. The restricted share sale violates federal securities laws that restrict trading in unregistered shares distributed to company affiliates.

Further complicating matters, Longfin’s CEO and controlling shareholder, Venkata Meenavalli, issued over two million unregistered restricted shares. The primary share allocation was provided to Altahawi, a Longfin director and the company’s corporate secretary. Not to mention, tens of thousands of restricted shares were provided to Penumarthi and Tammineedi. Allegedly and most damning, all three recipients were acting as nominees for Meenavalli.

“We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” said Robert Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”

Meenavalli, Altahawi, Penumarthi, and Tammineedi are charged with violating Section 5 of the Securities Act of 1933.