A financial technology company and its CEO settled SEC charges for (i) falsifying revenue and (ii) fraudulently securing the company's listing on Nasdaq.
According to the Complaint filed in the U.S. District Court for the Southern District of New York, Longfin Corp. and its CEO:
- made false representations about the company to obtain qualification for a Regulation A+ offering;
- 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.
To settle the charges, the CEO agreed to (i) disgorge $159,000, plus $9,000 in interest, (ii) pay a civil penalty of $232,000, (iii) release all of his Longfin stock, (iv) a permanent bar from acting as an officer or director of a public company, and (v) a ban from the offer or sale of penny stocks. Additionally, the court entered a default judgment against Longfin and ordered it to pay approximately $6.8 million in monetary relief. If approved by the court, the settlement will conclude the SEC's actions related to Longfin.
A parallel criminal action by the U.S. Attorney's Office for the District of New Jersey against the CEO is ongoing.
In a separate action filed by the SEC, the court previously entered judgments against Longfin, its CEO and three affiliated individuals related to allegations that they illegally distributed more than $33 million in Longfin stock.
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