LongFin Corp is a cryptocurrency-related company and the latest to fall in the legal claws of the Securities and Exchanges Commission (SEC). Now it has landed itself into a rather tough spot, as The United States District Court for the Southern District of New York has ordered the company to pay a total of $6,755,848 million in penalties.
According to reports the company under the spotlight was accused of committing securities fraud. In it’s report published on September 30th, the SEC announced that a federal court in New York penalized the crypto company for “conducting a fraudulent public offering and falsifying revenue from sham commodities transactions.”
The SEC had filed its complaint against the LongFin earlier this year in June, which alleged that the company and its CEO, Venkata S. Meenavalli, had obtained qualification for a Regulation A+ offering. Now the problem with that qualification was that it was obtained under false pretenses.
It claimed that the company was falsely represented in the SEC filings, according to which LongFin was principally managed and operated in the United States whereas in reality entire operations of the company including assets and their management remained offshore. In addition to that, they also distributed over 400,000 free Longfin shares to insiders and affiliates.
Per the report, both the CEO and the company have been accused of misrepresenting the number of qualifying shareholders and shares sold in the offering to meet Nasdaq listing requirements. It further alleged that Longfin and Meenavalli recorded more than $66 million in fictitious revenue from sham commodities transaction, amounting to more than 90% of Longfin’s total revenue 2017 reported. For now both the SEC and the U.S. Attorney’s Office for the District of New Jersey, have an ongoing action against Meenavalli.
This isn’t the regulatory body’s first dig at LongFin Corp. In fact last year SEC had alleged that the corporation and Meenavalli and three affiliated individuals illegally distributed and sold more than $33 million of Longfin stock in unregistered transactions. However that action has now been resolved, that is when earlier in June this year the court ordered the company to pay up over $26 million in disgorgement and penalties.
The SEC revealed that it plans on establishing a fair fund in order to distribute all the money that it has received from the defendants in the two aforementioned actions to the LogFin investors who were victimized in the alleged shams. It seems that the regulatory body has been hard at work, cracking down on securities fraud left and right, being extremely particular.
As BlockPublisher reported the United States regulatory authority sued the company on the alleged grounds of unregulated sale of securities during the initial coin offering (ICO) for its cryptocurrency Kin in 2017. It claimed that by linking the success of the crypto Kin with Kik’s success as a business, the company was effectively using the ICO to sell cryptocurrency as a security without proper regulatory compliance
Moreover SEC made another announcement on September 30th pertaining to its case against Block.one, the open-source software publisher providing end-to-end solutions for businesses or more commonly known as the firm behind EOS. How it landed in the regulatory claws on SEC has to do with the company’s initial coin offering (ICO).
According to reports Block.one managed to raise the equivalent of billions of dollars through its ICO, however the company failed to register its ICO as a securities offering in agreement with the U.S. federal securities laws. The SEC states. Co-director of the SEC’s Division of Enforcement Stephanie Avakian added:
Nor did it qualify for or seek an exemption from the registration requirements.
Now the case has reached its settlement with Block.one to $24 million in penalties for conducting an unregistered initial coin offering (ICO).