There is a threat of assets freeze on three individuals who are associated with Longfin Corp. The company’s shares jumped sharply after a blockchain pivot. That is because of some doubts on the kind of transactions that the company has done with these individuals. Even if there are any number of frauds being committed in the past and get caught at a later stage, there is no stoppage for its recurrence. Though laws are clear about illicit trading profits, people are trying to escape by hook or crook or circumvent such laws.
SEC Stands A Good Chance
A federal judge indicated that the Securities and Exchange Commission (SEC) stands a good chance of winning its case against the three individuals. They are associated with Longfin Corp, whose shares jumped over 2,000 percent last year following the announcement of its acquisition of a startup that is based on blockchain technology, coindesk reported. This is only bringing back the times of Internet era of 1997 – 2001 where a lot of people have placed their bets on the sector only to suffer later.
The U.S. District Judge Denise Cote pointed out that the regulator has bright chances of proving Deorababu Penumarthi, Suresh Tammineedi, and Andy Altahawi, benefiting illegally from the pivot. In her order, the judge said that “The SEC has shown that it is likely to prove at trial that these defendants participated in an unregistered illegal public offering of the stock of Longfin Corp.” The stock price has hit a 52-week high of $142.82 on the NASDAQ stock exchange and reached a low of $4.69 in the same period. On Wednesday, the stock closed at $28.189.
The regulator charged Longfin of issuing over two million unregistered restricted stocks to Altahawi. The company also issued the restricted shares to Tammineedi and Penumarthi. The SEC has frozen the assets in question from these three for their alleged role in profiting. The company’s stock plunged on March 26 after Citron, a short seller has called it as a pure stock scheme.
The SEC has resorted to halting share trading of Longfin on April 6. The regulator also freezes about $27 million for allegedly profiteering from trading activities. The SEC termed it as an emergency step meant to curb the money from leaving the country. The company’s chairman, Venkat Meenavalli, faced a charge of issuing unregistered stock to the three individuals. They then sold them to the public through illegal means.
CEO’s Assets Frozen
The company’s CEO was named as a defendant in the SEC case in the initial stage. However, the judge has opted to unfreeze the assets of the company, as well as, Meenavalli. This came after the company and the CEO demonstrated that they have not profited from any alleged illegal offering.
In January, the SEC chairman, Jay Clayton, indicated that the regulator was scrutinizing the public companies disclosure that is aiming to shift their business focus to capitalize the advantage of the distributed ledger technology. This is to make sure that there are no flaws in complying with securities regulations.