SEC v. Longfin Corp., et al. Case No. 18-cv-2977-DLC (S.D.N.Y.) SEC v. Longfin Corp., et al. Case No. 19-cv-5296-DLC (S.D.N.Y.)
Oct. 14, 2022
On April 4, 2018, unsealed on April 6, 2018, the Commission filed a complaint (the “Complaint”) against Longfin Corp. (“Longfin”), Venkata S. Meenavalli (“Meenavalli”), Amro Izzelden Altahwi a/k/a Andy Altahawi (“Altahawi”), Suresh Tammineedi (“Tammineedi”), and Dorababu Penumarthi (“Penumarthi”) (collectively, the “Defendants”). Among other things, the Complaint alleged that, from December 2017 to February 2018, the Defendants violated the federal securities laws by conducting sales of over $27 million of Longfin’s securities through unregistered distributions. See the Complaint.
The Court has since entered final judgments against all of the Defendants, ordering them, in the aggregate, to pay disgorgement of $22,862,377.23 and civil penalties of $3,582,941.97, for a total monetary liability of $26,445,319.20. Each of the final judgments orders the Commission to hold the funds (collectively, the “Fund”) pending further order of the Court. See Altawahi Final Judgment; Penumarthi’s Final Judgment; Tammineedi’s Final Judgment; Longfin’s Final Judgment; and Meenavalli’s Final Judgment.
The Defendants have paid, approximately, $26.1 million and these collections currently reside in an interest-bearing account at the U.S. Treasury’s Bureau of Fiscal Service. Any future funds collected pursuant to the Defendants’ Final Judgments will be added to the Fund, as well as any funds from related actions directed to the Fund by a court or Commission Order.
On April 15, 2020, the Court entered an order establishing a Fair Fund for the monies paid into the Fund (the “Fair Fund”), appointing Miller Kaplan Arase LLP as the Tax Administrator for the Fair Fund, and Epiq Class Action and Claims Solutions, Inc. as the Distribution Agent of the Fair Fund. See the Court Order.
On May 22, 2020, the Commission filed a Motion for an Order to Show Cause, seeking the entry of an Order to Show Cause why the Court should not approve the Commission’s proposed plan to distribute the Longfin Fair Fund (the “Proposed Plan”). See the Commission’s Motion.
On May 26, 2020, the Court granted the Commission’s motion and entered the Order to Show Cause. Individuals and entities who purchased Longfin Class A common stock, traded on the NASDAQ under the trading symbol LFIN, during the period June 16, 2017 through April 6, 2018, or other interested parties, have until June 25, 2020 to show cause, if there is any, why the Court should not enter an Order approving the Proposed Plan. The process by which cause can be shown is set forth in the Order to Show Cause. See the Court’s Order to Show Cause and the Proposed Plan. See the Court’s Order to Show Cause and the Proposed Plan.
On June 30, 2020, upon the expiration of the deadline in the Order to Show Cause, the Commission filed a Notice of No Objection to the Proposed Plan seeking the entry of an order approving the Proposed Plan. On June 30, 2020, the Court entered the Order Approving the Distribution Plan. See the Court’s Order Approving Distribution Plan.
On August 14, 2020, in related litigation, SEC v. Longfin Corp. and Venkata S. Meenavalli, 19-cv-5296-DLC (the “Related Litigation”), the Court issued an Order to Show Cause pursuant to which individuals and entities who purchased Longfin Class A common stock traded on the NASDAQ under the trading symbol LFIN from June 16, 2017 through the present, inclusive, or other interested parties were to show cause by September 13, 2020, why the Court should not, in that Related Litigation:(a) establish a Fair Fund pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002 for all funds under the Court’s jurisdiction in the Related Litigation plus accrued interest and future collections; and/or (b) approve the Commission’s proposal to combine the $300,000 in disgorgement, prejudgment interest, and civil penalty collected from the defendants in the Related Litigation, plus any accrued interest and future collections, with the Fair Fund for distribution to harmed investors pursuant to the Court-approved Plan in this action. See the Court’s Order to Show Cause; see also the Memorandum filed with the Commission’s motion for an order to show cause.
No objections were filed and on September 21, 2020, the Court entered an order granting the Commission’s motion thereby combining the funds collected in the Related Action, including accrued interest and any future collections, with the Fair Fund for distribution pursuant to the Plan. See the Court’s Order.
Pursuant to the Court’s April 15, 2020 order, the Distribution Agent has filed its first status report and future status reports are to be filed within twenty days after the end of each quarter. Copies are available on the Fair Fund’s website, https://www.longfinfairfund.com, under the “Documents” tab.
On June 8, 2022, the Commission instituted settled administrative and cease-and-desist proceedings against CohnReznick LLP (the “Administrative Action”). In the Matter of CohnReznick LLP, Admin. Proc. File No. 3-20891 (June 8, 2022). Relevant to this Civil Action, the Commission found that deficiencies in CohnReznick’s system of quality controls led to auditing failures in CohnReznick’s 2017 annual audit of Longfin. The Commission ordered CohnReznick LLP to pay a civil money penalty of $1.9 million, established a Fair Fund, and directed the combination of the Fair Fund with the Longfin Fair Fund for distribution to harmed investors in accordance with the Plan.
On August 25, 2022, the Commission filed a Motion for an Order to Transfer Funds for Distribution, so that the Distribution Agent can distribute $28,214,850.79 from the Longfin Fair Fund to investors eligible for a distribution under the Plan. See the Commission’s Motion. Also on August 25, 2022, the Court entered an order granting the Commission’s motion. See the Court’s Order.
For more information, please contact the Distribution Agent:
Epiq Class Action and Claims Solutions, Inc.
Telephone No. (855) 917-3464