In an effort to prevent allegedly illegal trading profits from leaving the U.S., the Securities and Exchange Commission (SEC) has obtained a court order to freeze more than $27 million in proceeds from sales of restricted shares of Longfin Corp. involving the company along with its CEO and three affiliated individuals, the agency said in a statement.
“We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” Robert Cohen, chief of the SEC Enforcement Division’s Cyber Unit, said. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”
Shares of Longfin skyrocketed after the company began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business. Then Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi and Suresh Tammineedi allegedly illegally sold large blocks of their restricted Longfin shares to the public. As a result of their sales, the three individuals allegedly netted more than $27 million in profits.
According to the agency’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. In addition, Meenavalli caused the company to issue tens of thousands of restricted shares to two other affiliated individuals, Penumarthi and Tammineedi, who were allegedly acting as nominees for Meenavalli. The SEC alleges the subsequent sales of those restricted shares violated federal securities laws that restrict trading in unregistered shares distributed to company affiliates.
The complaint, which was filed under seal on April 4, charges Longfin, Meenavalli, Altahawi, Penumarthi and Tammineedi with violating Section 5 of the Securities Act of 1933. Through the complaint, the agency is seeking injunctive relief, disgorgement of ill-gotten gains and penalties — among other relief.