Longfin

Longfin is a New York-based blockchain trading company that was charged with fraud by the SEC.
== Overview ==
At the end of Q1 for 2018, Longfin publicly reported revenue of $54 million - mostly from trading physical commodities ($53 million), with an additional $1.61 million profit earned from fees that Longfin charged third parties for using its "proprietary risk management and trading infrastructure technology." It also reported operating expenses of $51 million directly related to selling physical commodities, $1.16 million in fees related to technology revenue, $1.56 million of amortized expenses related to intangible assets acquired by Longfin during this period, $0.7 million in computer maintenance costs, and $2 million in operational and administrative expenses, including legal and professional fees, as well as $300,000 in employee compensation and payroll taxes. Combined, this translated to a $7.4 million net loss, according to Longfin's financial report.
=== Fraud allegations ===
In December of 2017, Longfin launched a "mini-IPO" under Reg A+ rules.{{cite web|url=https://www.globenewswire.com/en/news-release/2017/09/06/1108616/0/en/Longfin-NASDAQ-LFIN-Appoints-Network-1-as-Lead-Underwriter-as-it-Ramps-Up-for-its-Proposed-Listing-on-NASDAQ.html|name=Longfin (NASDAQ:LFIN) Appoints Network 1 as Lead Underwriter as it Ramps Up for its Proposed Listing on NASDAQ|org|GlobeNewsWire.com|date=February 8, 2024}] Shares of its stock, originally priced at $5 per share on Nasdaq, increased to $142 per share after Vankata S. Meenavalli, Longfin's CEO, acquired Ziddu.com, a cryptocurrency business. In 2018, the SEC asked a federal judge in Manhattan to freeze $27 million of Longfin's funds, which the SEC said were proceeds from illegal sales of stock shares under the ticker symbol LFIN. The SEC said that prior to the acquisition, Ziddu.com had no ascertainable value, producing no revenue and possessing no physical, technological, intellectual property, or personnel-related assets. The SEC said that during the IPO, Longfin employees and/or executives made sales of stock that were unregistered, and thus illegal. In January 2019, a default judgment was entered against Meenavalli and his associates, Amro Altahawi, Dorababu Penumarthi, and Suresh Tammineedi.
=== Litigation ===
In June 2019, the SEC filed fraud charges against Longfin and Meenavalli. In doing so, the SEC amended their original accusation, saying that the agency now alleged Longfin committed a "multi-pronged" fraud scheme that included falsified revenue, misrepresentation to the SEC, and false statements to Nasdaq, that the company had fabricated 90% of its revenue and sold over 400,000 shares of Longfin stock, but that Longfin did not have the funds to back, and that although Longfin's A+ offering took place based on the company's assertion that it was a U.S.-based company, though the company's operations, assets, and management were all offshore. The complaint also said that Meenavalli had engaged in insider trading, selling $2 million worth of unregistered shares to his consultant Altahawi and tens of thousands of dollars worth of shares to Penumarthi and Tammineedi. As well as the SEC, the U.S. Attorney’s Office for the District of New Jersey also announced on June 5, 2019 that it was pursuing criminal charges against Meenavalli.
The SEC settled some charges against Meenavalli in January 2020. Without admitting or denying those charges against him, Meenavalli agreed to disgorge the salary he earned as CEO and to pay a $232,000 civil penalty. At the time, additional charges against Meenavalli and Longfin were still being pursued by the SEC and the federal criminal fraud proceedings were continuing.
Altahawi was permanently barred from association with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, or nationally recognized statistical rating organization after submitting an offer of settlement, which was accepted by the SEC. In in offer of settlement, he issue this statement:
"I had a 24-year career without receiving a single citation from any regulatory body prior to this violation, which was reported on April 4m, 2018 by the Securities & Exchange Commission in the U.S. Southern District of New York. On May 23, 2019, I agreed to an SEC consent order and the administrative process, without admitting or denying any of the allegations made by the SEC, to settle the matter. On June 10, 2019, The SEC notified FINRA of the settlement." 
 
Altahawi also said that he had the right to reapply for association with a broker-dealer after five years and he intended to do so.
On July 23, 2019, Altahawi issued a press release responding to the SEC's charges about his selling of shares he received from Longfin for business consulting services.
On June 19, 2020, Altahawi filed a motion to modify his consent judgment with the SEC, citing Rules 60(b)(5) and (6), Fed. R. Civ. P., due to a lack of understanding of the tax implications of the judgment when it was initially entered the previous year. His motion was denied.
===Class Action Lawsuit===
Mohammad Malik is the lead plaintiff in a federal securities class action lawsuit filed on April 3, 2018 against Network 1 Financial Securities ("Network 1"), Longfin Corp. ("Longfin"), Andy Altahawi, and other executives and insiders associated with Longfin. After two amendments to the complaint, Network 1 was dismissed from the case. The court certified the class on May 14, 2020.
Altahawi and Penumarthi were dismissed without prejudice from this class action case on the basis that they have no assets from which to recover.
===Fair Fund===
Investors who purchased shares of Longfin Class A common stock, traded on the Nasdaq under the symbol LFIN, during the period of June 16, 2017 to April 6, 2018 (inclusive), may be eligible for a distribution from the Longfin Fair Fund. Excluded from the Fair Fund distribution were any director, officer, past or present of Longfin. The defendants in the cast were excluded, as was the distribution agent and any purchaser of another person's purported right to obtain a recovery. 
The court ordered the defendants to pay $26,445,319.20 in disgorgement and civil penalties. Approximately $26.1 million has been collected and held in an interest-bearing account. The Fair Fund, known as the Longfin Fair Fund, was established on April 15, 2020, with Miller Kaplan Arase LLP as the Tax Administrator and Epiq Class Action and Claims Solutions, Inc. as the Distribution Agent.
=== Liquidation === 
Longfin's board voted to liquidate the company on November 14, 2019, having determined that the value of liabilities exceeded the assets. Shareholders were expected to receive nothing in the process.
== Products and Services ==
Longfin Corp described itself as a "global fintech company powered by artificial intelligence and machine learning," and a subsidiary of Longfin Tradex Pte. Ltd. Its primary service was providing alternative financial services, including forex trading for importer/exporters. The report also claims ownership of Ziddu.com, a smart contracts marketplace based off of the Ethereum blockchain.
== Key People ==
*Vankata S. Meenavalli, CEO
*Amro Izzelden “Andy” Altahawi, consultant to Meenavalli
*Dorababu Penumarthi 
*Suresh Tammineedi
== References ==
Category: cryptocurrency
Category: exchanges
Category: regulation
Category: trade
Category: criminal activity
Category: enforcement
Category: fintech
Category:CryptoMarketsWiki