Trading was halted in Longfin (LFIN) Friday after the Securities and Exchange Commission obtained a court order to freeze more than $27 million in purportedly illegal stock sales.
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The regulator is accusing the company's CEO and controlling shareholder Venkata Meenavalli of having more than 2 million unregistered shares issued to another director in the company. In addition, tens of thousands of restricted shares were also allegedly given to two other affiliates. Many are said to have been then illegally sold when the stock price rocketed after an announced cryptocurrency play.
"We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country," Robert Cohen, Chief of the SEC Enforcement Division's Cyber Unit, said in a press release. "Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues."
Longfin didn't immediately respond to a request for comment.
Longfin shares had been up 47.3% at 28.19 on the stock market today before Nasdaq halted trading. Among other Bitcoin-related stocks, Riot Blockchain (RIOT) was down 8.6%, Long Blockchain (LBCC) sank 6.8%, Overstock.com (OSTK) was up 0.6%, Marathon Patent Group (MARA) fell 2.5% and Bitcoin Investment Trust (GBTC) eased 4.8%.
According to the filing, Amro Izzelden Altahawi, Dorababu Penumarthi, and Suresh Tammineedi illegally sold large blocks of their shares to the public when the firm's stock price rose following the announced acquisition of a purported cryptocurrency business last December. The stock shot up to 142 from 5 in its first three days of trading.
Altahawi was corporate secretary and a director of Longfin, while Penumarthi and Tammineedi are accused of acting as nominees for CEO Meenavalli. Insiders usually have lockup periods ranging from 90 to 180 days before being allowed to sell their stock.
The SEC has charged Longfin, CEO Meenavalli, Altahawi, Penumarthi, and Tammineedi with violating Section 5 of the Securities Act of 1933. The complaint seeks injunctive relief, disgorgement of ill-gotten gains, and penalties, among other relief.
The stock exploded in December after the company announced that it acquired Ziddu.com, a blockchain technology provider that offers microfinance lending. Meridian Enterprises, which sold Ziddu, is a private Singapore company 95% owned by Longfin's CEO Meenavalli.
Longfin's market capitalization exceeded $3 billion after its stock price rocketed, and the accused are said to have raked in more than $27 million in profits from the supposed scheme.
The company's December initial offering had previously been touted as a successful example of the 'mini-IPO' rules known as Reg A+, which allow small businesses and startups to raise up to $50 million.
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The post Trading In Crypto Firm Longfin Halted After SEC's Illegal Stock Sales Claim appeared first on Investor's Business Daily.
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