SEC Settles Fraud Case Against Longfin CEO: A Cautionary Tale in Cryptocurrency

The SEC Takes Action

On January 3, the U.S. Securities and Exchange Commission (SEC) dropped a bombshell by announcing a settlement with Venkata Meenavalli, the CEO of the cryptocurrency company Longfin. In what can only be described as a plot twist straight out of a financial thriller, Meenavalli is required to cough up a hefty $400,000 to settle the SEC’s fraud case against him. But hold on tight, this is just the tip of the iceberg.

What’s the Backstory?

The SEC’s complaint alleges quite the tangled web. Apparently, Longfin and its CEO juggled facts like a circus performer, falsely claiming the company was U.S.-based to snag a Regulation A+ qualification for their offering. Subsequently, over 400,000 shares were reportedly shifted to Meenavalli’s affiliates under dubious circumstances just to get onto Nasdaq’s dance card. Talk about a slippery slope!

Fictitious Revenue: A Comedy of Errors?

In a plot twist that makes one wonder if “The Office” filmed a behind-the-scenes special on finance, over 90% of Longfin’s reported 2017 revenue was “fictitiously derived from sham commodities transactions,” the SEC states. Imagine creating an entire facade to impress investors! It’s like telling your friends you’re an astronaut because you once wore a space helmet on Halloween.

The Rollercoaster of Longfin’s Stock

Remember that surreal moment in December 2017 when Longfin’s shares skyrocketed by over 1,000%? All thanks to the announcement of their acquisition of Ziddu, a cryptocurrency company that had, well, a valuation as mysterious as the Bermuda Triangle. Meenavalli was quick to argue that this dizzying market cap was unwarranted, while his affiliates reportedly cashed in on unsuspecting investors.

The Inevitable Fall

The bubble burst, and investors’ confidence plummeted when it was revealed that Meenavalli owned 95% of Ziddu’s parent company. Subsequent to the SEC investigation, Longfin’s stock tanked by 30%. As they say, what goes up must come down—especially when it’s precariously balanced on unverified information!

Settling the Score

In the aftermath, over $33 million was recovered from Longfin’s shady dealings. The details of Meenavalli’s settlement are that he will pay $159,000 (his full salary as CEO), $9,000 in prejudgment interest, and a civil penalty amounting to $232,000. Additionally, he will relinquish all his Longfin stock and will forever be barred from serving as an officer or director of a public company. Lesson learned, right?