A US federal judge has extended the freeze $27 million in assets owned by individuals behind Longfin, a company that saw its value surge as much as 2600% in late December following a purported pivot into the cryptocurrency space.
In a ruling on Tuesday, a federal district court in Manhattan approved a motion filed by the Securities and Exchange Commission (SEC) to grant a preliminary injunction and a continued freeze on $27 million in assets owned by Andy Andy Altahawi, Dorababu Penumarthi, and Suresh Tammineedi, a trio associated with Longfin Corp.
Notably, US District Judge Denise Cote said the trio is likely to lose a trial against the government, suggesting the latter is likely to prove that the three individuals illegally profited from the alleged sale of restricted shares.
The Judge wrote in a court order:
The SEC has carried its burden of showing a likelihood of success of proving at trial that the three defendants violated Section 5 in selling their shares.
Earlier in December 2017, Longfin, which claims to be a fintech firm, saw its value surge as much as 2,600% after announcing its purchase of Ziddy.com. The company said it had acquired a “blockchain-empowered global micro-lending solutions provider’ in its blockchain pivot at a time when bitcoin price had scaled above $19,500 in an unprecedented bullish run. Longfin also began trading on NASDAQ and saw its market capitalization exceed $3 billion.
The SEC has alleged that the three individuals illegally sold restricted company shares to the public at a time when the stock’s price was highly elevated, resulting in collectively reaping over $27 million in profits.
“We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” said SEC Enforcement Division’s cyber unit chief Robert Cohen in April, upon receiving a court order to freeze funds belonging to the individuals and the company. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues,” he added.
Meanwhile, Judge Cote partially lifted the freeze with respect to the assets of Longfin and its CEO Venkata Meenavalli on April 23. Meenavalli was initially named as a defendant in the original SEC complaint but was able to prove to the court that neither he, nor the company, benefited from the alleged illegal sale of shares.
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