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Cryptocurrency company LongFin Corp. and its CEO, Venkata S. Meenavalli, agreed to pay $400,000 in disgorgement and penalties to resolve the Securities and Exchange Commission's fraud action against them, the SEC said Friday.
The settlement concludes the SEC's actions against LongFin, Meenavalli and three other individuals in which the SEC said it's secured more than $26 million of "ill-gotten gains." However, the settlement remains subject to court approval, it noted.
The SEC's complaint, filed June 5, alleged that LongFin and Meenavalli obtained qualification for a Regulation A+ offering — that is, a small offering with looser reporting requirements than a typical offering — by falsely representing in public filings that the company was managed and operated in the U.S. LongFin and Meenavalli then distributed over 400,000 Longfin shares to Meenavalli's affiliates, then misrepresented the offering to Nasdaq in order to meet its listing requirements, the SEC said.
Back in 2017, LongFin stock enjoyed a four-day rally that reached 2,600% Dec. 18 that year, earning its CEO an appearance on CNBC.
However, the SEC's complaint alleged that more than 90% of LongFin's reported revenue for 2017 was fictitiously derived from "sham" commodities transactions.
"As alleged in our complaint, Meenavalli abused the Reg. A+ process to conduct a fraudulent offering, list Longfin on Nasdaq, and entice investors with falsified revenue," according to Anita B. Bandy, associate director of the SEC's Division of Enforcement. "The SEC staff's quick actions exposed the full scope of Meenavalli's fraud and resulted in additional monetary and prophylactic relief to prevent him from defrauding U.S. investors in the future," she said in a statement Friday.
If approved, the settlement would require Meenavalli to disgorge $159,000 (his full salary received while serving as LongFin CEO) plus prejudgment interest of $9,000, and to also pay a $232,000 civil penalty, the SEC said. It would also require Meenavalli to surrender all of his LongFin stock, permanently bar him from acting as an officer or director of any public company, and enjoin him from participating in the offer or sale of penny stocks, according to the SEC.
