NY Court Orders Longfin to Pay $223M to Investors After Blockchain Pivot Turns Securities Fraud

Longfin, a now-defunct crypto firm that raised $27 million in 2017, has been ordered by a Manhattan federal judge to repay $223 million to its investors along with interest in the alleged security fraud case. Longfin acquired an undervalued company back in 2017, after which its share prices surged by 1000%.

The judgment came on July 29, where the federal judge concluded that Longfin, along with its chief executive Venkata Meenaalli, CTO Vivek Ratakonda, and the director of two related companies, Suresh Tammineedi collectively owned a nine-figure sum. The case’s ruling has granted a default judgment, as requested by lead plaintiff Mohammad Malik in January. The judge in his decision noted that Malik:

“offered sufficient evidentiary support through declarations and exhibits submitted in support of his claim for damages, and no evidentiary hearing is required.”

A Brief History of the Case

Longfin launched an IPO as a Regulation A+ offering back in September 2017, which allowed the firm to raise funds from both accredited and non-accredited investors. It also obtained waivers from several registration requirements of the Securities Exchange Act of 1934. It went on to raise $27 million by December and called its IPO a successful event.

At the time, the firm also claimed that it had become the first publicly listed fintech firm under Reg A+ on Nasdaq. Soon after a successful IPO, Longfin acquired Ziddu.com, a cloud storage solution that claimed it had incorporated blockchain technology. The price of Longfin’s share surged by 1000% from $5 a share to $140 in early 2018. However, shareholders accused the company of issuing false and misleading statements, which led to the 1000% surge.

The firm is also accused of selling its shares after the surge, which prompted the Security and Exchange Commission (SEC) to look into the firm’s working and investigate any wrongdoing. The SEC started their investigation in April 2018, and soon after, the price of the shares crashed.

In September 2019, the SEC received a judgment in its favor against Longfin, where a New York federal court found that the crypto firm falsified documents and data to receive Regulation A+ offering.

The court also found that Longfin lied about primarily operating from the US and lied about qualifying shares and shareholders sold in the offering. The court found that $66 million in revenue generated by the firm came from “fictitious revenue and sham commodities transaction” equivalent to 90% of the company’s revenue.

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Author: Rebecca Asseh

800 BTC Transfer has Investors Fearful of Mt. Gox Dump After Rehabilitation Plan Extended

On March 31st, 800 BTC worth over $5 million was transferred from now-defunct bitcoin exchange Mt. Gox, as per Whale Alert, a live tracker of large crypto transactions from and to exchanges for cryptocurrencies.

Investors are now fearful of another sell-off as Mt Gox gets ready to dump BTC in the market. This movement of funds came hot on the heel of the exchange’s rehabilitation plan pushed back to July 1.

Trader Jacob Canfield said Mt. Gox is one of the bearish narratives in play for bitcoins as its trustee comes “back to sell some more.”

Currently, BTC/USD is trading just above $6,200, down 3.49% while recording minus 14% returns YTD.

Deadline of the rehabilitation plan extended

The exchange collapsed in early 2014 declaring insolvency amidst the allegations of fraud and mismanagement. The CEO of the exchange was also found guilty of tampering with financial records.

The hackers stole 850,000 BTC in 2014 and the exchange had 200,000 BTC in an old-format wallet. As per the latest count, Mt. Gox estate held about 141,600 BTC and 142,800 BCH. The trustee, attorney Nobuaki Kobayashi, sold off about $400 million worth of BTC in early 2018 causing the market to crash.

In June 2018, Mt. Gox entered civil rehabilitation. – Source: CryptoGround

As per the draft rehabilitation plan in circulation, the head of the creditor meeting, Kobayashi laid down the details about the wind-down of the exchange. The draft further mentioned that payouts will be in the form of claims filed, that would involve Bitcoin (BTC), bitcoin cash (BCH) and because they would be insufficient, in fiat currency like Japanese yen.

“Most of these creditors are generally bitcoin specialties themselves who want to remain in the market; so to sell off BTC and pay them in fiat not only locks them into a price at exit and caps their potential upside but also would lead to a sell-off in the market, which, as happened in 2018, can get messy,” Alex Ortega, managing principal of Iverson Capital Group, the first company that bought Mt. Gox creditor claims in 2016 told CoinDesk.

The original court-ordered deadline for the rehabilitation was March 31 but because of the “matters that require closer examination with regard to the rehabilitation plan, it has become necessary to extend the submission deadline for the rehabilitation plan,” reads the notice.

Following the meeting, the Tokyo District Court granted Kaboyashi’s deadline extension which was already extended to in October 2019.

“In light of the foregoing, the Rehabilitation Trustee filed a motion to seek an extension of the submission deadline of the rehabilitation plan at the Tokyo District Court, and, on March 27, 2020, the Tokyo District Court issued an order to extend the submission deadline for the rehabilitation plan to July 1, 2020,” the notice added.

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Author: AnTy