SEC Freeze of Blockchain-Linked Funds Backed by Federal Judge

(Bloomberg) -- A federal judge ruled three business associates of a financial technology company are likely to lose at a trial over government accusations that they sold unregistered stock in the firm after a rally linked to cryptocurrency.

U.S. District Judge Denise Cote in Manhattan granted a preliminary injunction and maintained a freeze on $27 million of assets of Andy Altahawi, Suresh Tammineedi and Dorababu Penumarthi, who are associated with New York-based Longfin Corp. The U.S. Securities and Exchange Commission case filed April 4 also named Longfin Chief Executive Officer Venkata S. Meenavalli.

The agency "is likely to prove at trial that these defendants participated in an unregistered, illegal public offering," Cote said.

Another judge in April froze the proceeds from sales of Longfin shares as regulators claimed the gains had flowed from illegal trades by insiders after the financial technology firm touted ties to blockchain. The freeze was lifted April 23 by Cote with respect to Longfin and Meenavalli at the SEC's request after the CEO showed that neither he nor the company benefited from the allegedly illegal stock sales, court records show.

"We were pleased that Judge Cote vacated the temporary restraining order and asset freeze against Longfin and its CEO, and appreciate that the SEC found that neither the company nor its CEO received any proceeds from the securities sales at issue," Jay Musoff, the company lawyer, said in an email.

Robert Heim, a lawyer representing Altahawi, Tammineedi and Penumarthi, didn't immediately return a call.

Longfin Sale Proceeds Frozen as SEC Alleges Illegal Trading

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net.

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Paul Cox

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