Indian CEO charged in U.S. for alleged $66 million accounting fraud scheme

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The CEO of a publicly traded commodities trading company was 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.

The Department of Justice (DOJ) logo is pictured on a wall after a news conference to discuss alleged fraud by Russian Diplomats in New York December 5, 2013. REUTERS/Carlo Allegri

The indictment announced June 5, by U.S. Attorney for the District of New Jersey, Craig Carpenito says Venkata Meenavalli, 49, of India, was charged with securities fraud. 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.

The charge and allegations contained in the indictment are merely accusations, and the defendant is presumed innocent unless and until proven guilty.

According to the press release from Carpenito’s office, prosecutors say documents filed in this case show that in 2017 and 2018, Meenavalli and others allegedly 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, prosecutors say. 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, the charge alleges.

According to the court documents prosecutors say 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, the indictment alleges.

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, the press release says, 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 press release from the U.S. Attorney’s Office says.

Separately, on the same day, the U.S. Securities and Exchange Commission filed a new fraud action against Longfin and Meenavalli for allegedly falsifying the company’s revenue and, together with a former Longfin consultant, for fraudulently securing the company’s listing on Nasdaq.

 

 

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