Posted on

Asset Freeze Continues for Public Company That Pivoted to Crypto

The U.S. Securities and Exchange Commission (SEC) is likely to win its case against three individuals associated with Longfin Corp, a company whose stock skyrocketed after a blockchain pivot, said a federal judge.

U.S. District Judge Denise Cote said on Tuesday that the regulatory agency has a good chance of proving that Andy Altahawi, Suresh Tammineedi and Dorababu Penumarthi illegally benefited from the pivot. Longfin’s price jumped by more than 2,000% last year after it announced the acquisition of a blockchain startup.

In the court order, she wrote:

“The SEC has shown that it is likely to prove at trial that these defendants participated in an unregistered, illegal public offering of the stock of Longfin Corp.”

As part of this decision, Cote granted a preliminary injunction to the SEC and also maintained a freeze on $27 million worth of assets owned by Altahawi, Tammineedi and Penumarthi that the Commission sought in April.

As previously reported by CoinDesk, the SEC alleges that Longfin issued more than two million unregistered restricted shares to Altahawi, and tens of thousands of restricted shares to Penumarthi and Tammineedi, from which the three individuals garnered the now frozen assets in question.

The company’s CEO, Venkata Meenavalli, was also initially named as a defendant in the case, but Cote unfroze the assets of both Meenavalli and Longfin on April 23 after the latter demonstrated that neither he nor the company profited from the allegedly illegal offering.

January comments by the SEC Chairman Jay Clayton foreshadowed the Longfin case. He remarked at the time that the Commission is scrutinizing “the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology” to ensure that they comply with securities laws.

Scales image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.