A New York court has ruled that Longfin Corp. owes its investors over $223 million in a default judgment against the company. Longfin was accused of deceiving investors by issuing false statements regarding its listing on Nasdaq.
The Southern District of New York court granted the motion moved by the lead plaintiff Mohammad Malik for the entry of default judgment against the company and its executives. The court had set July 24 as the deadline for a request for entry of default judgment. Since the defendants had failed to oppose the judgment, Judge Denise Cote issued a default ruling against them.
In her ruling, Judge Cote stated, “Judgment is entered in favor of the class against the Defaulting Defendants, jointly and severally, in the amount of $223,037,680, plus prejudgment interest beginning on April 6, 2018 and post-judgment interest until the judgment is satisfied.”
Longfin’s alleged scam began in 2017 when the company conducted an initial public offering on the Nasdaq exchange. It issued 409,360 shares of its common stock to investors to get listed on the exchange. At the time, it claimed to be the first public-listed fintech firm under Reg A+ on Nasdaq. This regulation allows listed companies to raise funds from both accredited and non-accredited investors.
The company pivoted to blockchain in 2017 after it purchased Ziddu.com, a blockchain solutions provider. With digital currency and blockchain hype being at an all-time high, its stock price surged by over 2,700% from $5 during the offering to over $142 in early 2018.
Longfin’s house of cards began to crumble in April 2018 when the U.S. Securities and Exchanges Commission (SEC) launched an investigation into the company. The regulator accused Longfin of having used misleading and false statements to qualify for a Reg A+ offering.
The company shut down in November 2018, the filing claims. However, the SEC continued to pursue it, successfully suing to freeze over $26 million of the company’s assets. A New York court also ordered Longfin to pay $6.8 million in penalties last year. The CEO Venkata S. Meenavalli further agreed to pay $400,000 in disgorgement and penalties.
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