CEO Of Public Commodities Trading Company Charged In $66 Million Accounting Fraud Scheme
Defendant Allegedly Inflated Company’s Revenue to Defraud Investors
NEWARK, N.J. – The CEO of a publicly traded commodities trading company has been indicted for allegedly orchestrating an accounting scheme to defraud investors and others by recognizing more than $66 million in fake revenue in the company’s public filings, U.S. Attorney Craig Carpenito announced today.
Venkata Meenavalli, 49, of India, was charged by indictment with securities fraud.
According to documents filed in this case:
In 2017 and 2018, Meenavalli and others orchestrated a multimillion-dollar accounting fraud relating to Longfin Corp., a publicly traded company purportedly engaged in sophisticated commodities trading and so-called “cryptocurrency” transactions, including “blockchain-empowered solutions.” In fact, Longfin did not engage in any revenue-producing cryptocurrency transactions, and did not use the blockchain to empower any solutions. Longfin reported as revenue millions of dollars of commodities transactions, which were actually sham events between Longfin and separate entities Meenavalli controlled, using phony bills of lading and other fraudulent documents.
Longfin fraudulently reported in its public filings with the U.S. Securities and Exchange Commission (SEC) more than $66 million of revenue that was never actually earned and should never have been recognized. By including this phony revenue in the company’s public filings, Meenavalli and others made Longfin’s shares more attractive to potential investors.
Longfin’s 2017 Form 10-K (a required annual report to the SEC) claimed that its primary source of revenue was from “structured trade finance,” including “the sale of physical commodities.” Longfin falsely reported million in accounts receivable in purported physical commodity sales that never occurred. In fact, Meenavalli allegedly owned or controlled several entities that purportedly did business with Longfin, and did not disclose those relationships to Longfin’s shareholders or the investing public.
The count of securities fraud with which Meenavalli is charged carries a maximum potential penalty of 20 years in prison and a $5 million fine.
Separately, the U.S. Securities and Exchange Commission today filed a new fraud action against Longfin and Meenavalli for falsifying the company’s revenue and, together with a former Longfin consultant, for fraudulently securing the company’s listing on Nasdaq.
U.S. Attorney Carpenito credited special agents of the FBI, under the direction of Special Agent in Charge Gregory W. Ehrie, with the investigation leading to charges announced today. He also thanked the U.S. Securities and Exchange Commission in Washington, D.C., and Stephanie Avakian and Steven Peikin, co-directors of the Division of Enforcement, for the assistance of the Enforcement staff.
The government is represented by Assistant U.S. Attorney Catherine Murphy of the U.S. Attorney’s Office’s Economic Crimes Unit and Zach Intrater, Executive Assistant U.S. Attorney.
The charge and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.