A US federal judge has extended the asset freeze on accounts owned by individuals behind Longfin Corporation.
Longfin Corporation is a company that recently saw a massive stock price surge after pivoting to become a blockchain focused company. After the company announced their move to the cryptocurrency industry in December of 2017, the stock increased as much as 2600%.
The US Securities Exchange Commission asserted in April that three individuals associated with Longfin illegally benefited from their company’s acquisition of a “blockchain-empowered global micro-lending solutions provider” during the cryptocurrency bull run in December. The SEC said that the three individuals illegally sold restricted company shares during the period of time the shares were inflated in value, resulting in over $27 million in profits.
US District Judge Denise Cote approved the SEC’s motion to continue the freeze on the $27 million in funds owned by Dorababu Penumathi, Suresh Tammineedi, and Andy Altahawi. Judge Cote said that the three are unlikely to win a trial against the government, and that the funds do appear to be acquired illegally.
In a court order the judge explained her ruling, saying in part, “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.”
The SEC explained their actions, saying “We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country. Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”
Longfin Corp and the CEO, Venkata Meenavalli, also had their funds frozen by the SEC, but Judge Cote partially lifted the freeze due to a lack of evidence in the CEO and company’s involvement in the illegal shares sale.
SEC Chairman Jay Clayton mentioned the illegal sale of stock in companies that significantly shift their business models in January, saying that the SEC would be scrutinizing "the disclosures of public companies that shift their business models to capitalize on the perceived promise of distributed ledger technology."