The Southern District of New York ruled on Wednesday that the publicly traded firm Longfin Corp. must reimburse investors over $223 million in a default ruling of the dispute over the company's 2017 initial public offering (IPO).
Default judgments occur when a defendant fails to appear or respond in court, although they can be appealed if the defendant produces a valid reason for missing a deadline. The deadline for a request for entry of judgment was July 24th, which passed without defendants opposing it, the filing said.
"On June 26, Lead Plaintiff submitted a letter stating that the SEC [Securities and Exchange Commission] calculated damages based on the defendants' unlawful gains, while damages calculations were measured by investors out-of-pocket losses in the class action," according to the filing.
Longfin has been accused of deceiving its shareholders and falsifying its eligibility for a listing on Nasdaq. Apart from Longfin itself, those accused are its CEO Venkata Meenaalli, CTO Vivek Ratakonda and Suresh Tammineedi, who was the director of two companies related to Longfin, according to the court filing.
In 2017, as part of the alleged scam, the company issued 409,360 shares of Longfin common stock to acquire a listing on Nasdaq. Moreover, its stock price went up by 2000% immediately after it acquired an undervalued blockchain startup. Around the same time, the alleged participants made up false and deceiving statements about the company from December 2017 through March 2018 in order to maneuver the price of Longfin's shares, which eventually rose to $142.82 per share.
After a number of allegations about the firm surfaced, the SEC launched an investigation into it, according to the filing. The company shut down in November 2018 — however it continues to pay the reimbursement.