The US Securities and Exchange Commission, or SEC, is going ahead with its efforts to compensate Longfin Corp investors.
$26 Million Planned For Investor Distribution
On the 22nd of May, 2020, the SEC had submitted a proposed distribution plan at the Southern District Court of New York. This plan runs alongside a Motion from the SEC for an Order To Show Cause. This Order is in regards as to why the Court should not approve the proposed plan, to begin with.
This plan, in particular, will see more than $26 million distributed to compensate the investors that partook in the common stocks of Longfin Corp.
A Bit Of History
It was back on the 4th of April, 2018, when the SEC first started its action against Longfin Corp. Alongside the company stood Amro Izzelden Altwahwi, Venkata S. Meenavilli, Dorobabu Penumarthi, and Suresh Tammineedi.
According to the allegations from the commission, the defendants had raised more than $27 million through an unregistered distribution of Longfin Securities. This, of course, is in direct violation of Section 5 of the Securities Act of 1933. This Act explicitly prohibits the sale of unregistered securities, unless a specific exemption is applied under the Federal Securities Laws.
As the complaint states, Meenavalli, the CEO and controlling shareholder of Longfin, had issued more than two million in restricted, unregistered shares to Altahawi. Altahawi stood as the director and corporate secretary of Longfin. Meenavalli distributed tens of thousands of these restricted shares to two other affiliated individuals as well: Tammineedi and Penumarthi.
A Small Silver Lining
All these individuals waited until just after Longfin had started trading on NASDAQ. During this time, the company announced an acquisition of a purported crypto firm. After the announcement, all parties besides Meenavalli then proceeded to sell their restricted longfin shares in bulk, doing so as the stock price was elevated. It’s estimated that the profits were in excess of $27 million.
The Court has since entered the final judgment stages against all clients involved. In short, the Court ordered all the defendants to pay disgorgements worth $22,862,377.23, in aggregate, as well as further civil penalties worth $3,582,941.97. In total, this means a monetary liability of $26,445,319.20 that the Defendants must pay.
Of this amount, however, the Defendants have already paid an approximate 26.1 million, which had been deposited within an interest-bearing account within the Bureau of Fiscal Service of the US Treasury. Each of these final judgments had provided that the SEC may start proposing a plan on distributing the collected funds to the investors who suffered damages.