The SEC filed a new action against a financial technology company and its CEO for (i) falsifying revenue and (ii) fraudulently securing the company's listing on Nasdaq. As previously covered, the SEC secured a court order freezing proceeds from the distribution and sale of restricted shares of Longfin Corp. ("Longfin") and filed charges against the CEO and three affiliates.
According to the Complaint, the SEC alleges that Longfin and its CEO:
- falsely represented the company to obtain qualification for a Regulation A+;
- distributed over 400,000 Longfin shares to insiders and affiliates without obtaining any payment in order to meet Nasdaq listing criteria; and
- engaged in an accounting fraud scheme in which they recorded over $66 million in "sham revenue" that represented approximately 90 percent of Longfin's total 2017 reported revenue.
Additionally, a Longfin consultant is accused of misrepresenting the number of qualifying shareholders and shares sold in the offering to Nasdaq.
In a parallel action, the U.S. Attorney's Office for the District of New Jersey filed criminal charges against the Longfin CEO.
The SEC noted that the Longfin consultant and two affiliated individuals offered to settle the SEC charges. The proposed settlement agreements are pending before the court.
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