Crypto CEO Settles With SEC Over Regulation A+ Offering Fraud
The Securities and Exchange Commission announced that Longfin Corp. chief executive officer Venkata Meenavalli has agreed to pay $400,000 in disgorgement and penalties to resolve the SEC’s fraud action against him.
The Securities and Exchange Commission announced that Longfin Corp. chief executive officer Venkata Meenavalli has agreed to pay $400,000 in disgorgement and penalties to resolve the SEC’s fraud action against him.
The SEC’s complaint alleged that Longfin and Meenavalli obtained qualification for a Regulation A+ offering by falsely representing in public filings that the company was managed and operated in the U.S., when its operations, assets and management remained offshore.
According to the complaint, Longfin and Meenavalli purportedly distributed more than 400,000 Longfin shares to Meenavalli’s affiliates, and misrepresented the offering to Nasdaq in order to meet its listing requirements.
The SEC’s complaint alleges that Longfin and Meenavalli also engaged in an accounting fraud, recording more than $66 million in sham revenue, representing nearly 90 percent of the company’s total 2017 reported revenue. Longfin voluntarily delisted from Nasdaq in May 2018 and shut down in November 2018.
“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,” said Anita B. Bandy, associate director of the 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.”
If approved by the court, the settlement would require Meenavalli to disgorge $159,000 (his full salary received while acting as Longfin’s CEO) plus prejudgment interest of $9,000, and to pay a $232,000 civil penalty.
It would also require him to surrender all of his Longfin stock, permanently bar him from acting as an officer or director of a public company, and enjoin him from participating in the offer or sale of penny stocks. Meenavalli has agreed to settle the charges without admitting or denying the SEC’s allegations.
The SEC previously obtained a default judgment against Longfin that ordered nearly $6.8 million in monetary relief. A parallel criminal action against Meenavalli, filed by the U.S. Attorney’s Office for the District of New Jersey, remains ongoing.
The SEC previously filed a separate action alleging that Longfin, Meenavalli, and three affiliated individuals illegally distributed and sold more than $33 million of Longfin stock in unregistered transactions.
In June 2019, the court ordered more than $26 million in disgorgement and penalties against the three affiliates, and in August entered default judgments ordering civil penalties of approximately $284,000 and $28,000 against Longfin and Meenavalli, respectively.
