Longfin Corp. (NASDAQ: LFIN) is under a lot of fire after the U.S. Securities and Exchange Commission (SEC) halted the stock and is now suing the company. This very well could be a death sentence for the blockchain firm.
As recently as Friday, the agency obtained a court order freezing over $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin stock involving the company, its chief executive officer and three other affiliated individuals.
Shortly after Longfin began trading on the Nasdaq and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion. As quickly as this firm has seen its stock shoot up, it looks like we can expect this stock to crash following these allegations, hence the trading halt.
The SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi and Suresh Tammineedi then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Altahawi, Penumarthi and Tammineedi collectively reaped more than $27 million in profits.
According to the SEC’s complaint, Longfin’s founding CEO and controlling shareholder, Venkata Meenavalli, caused the company to issue more than 2 million unregistered, restricted shares to Altahawi, who was the corporate secretary and a director of Longfin, and tens of thousands of restricted shares to two other affiliated individuals, Penumarthi and Tammineedi, who were allegedly acting as nominees for Meenavalli. The subsequent sales of those restricted shares violated federal securities laws that restrict trading in unregistered shares distributed to company affiliates.
Robert Cohen, chief of the SEC Enforcement Division’s Cyber Unit, commented:
We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country. Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.
Shares of Longfin were last seen frozen at $28.19, with a post-IPO range of $4.69 to $142.82.