Meenavalli, caused the company to issue more than two million unregistered, restricted shares to Altahawi.
The Securities and Exchanges Commission (SEC) has initiated an investigation into an alleged securities fraud with a cryptocurrency company founded by an Indian American.
Venkat Meenavalli, the founder and CEO of the cryptocurrency company Longfin, and his three associates are being investigated by the SEC authorities. The authorities have already frozen more than $27 million in trading proceeds from allegedly illegal distributions and sales of restricted shares of Longfin. Last week, the company was suspended from trading on Nasdaq.
According to the complaint filed by SEC in federal court in Manhattan on April 4, shortly after Longfin began trading on NASDAQ and announced the acquisition of a purported cryptocurrency business, its stock price rose dramatically and its market capitalization exceeded $3 billion.
The SEC alleges that Amro Izzelden “Andy” Altahawi, Dorababu Penumarthi, and Suresh Tammineedi then illegally sold large blocks of their restricted Longfin shares to the public while the stock price was highly elevated. Through their sales, Altahawi, Penumarthi, and Tammineedi collectively reaped more than $27 million in profits.
The complaint alleges that Meenavalli, caused the company to issue more than two million unregistered, restricted shares to Altahawi, who was the corporate secretary and a director of Longfin, and tens of thousands of restricted shares to two other affiliated individuals, Penumarthi and Tammineedi, who were allegedly acting as nominees for Meenavalli. The subsequent sales of those restricted shares violated federal securities laws that restrict trading in unregistered shares distributed to company affiliates.
“We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” said Robert Cohen, Chief of the SEC Enforcement Division’s Cyber Unit. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”
The SEC’s 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. The complaint seeks injunctive relief, disgorgement of ill-gotten gains, and penalties, among other relief.