Federal judge extends freeze on more than $27 million tied to Longfin share sales

A federal judge on May 1, 2018 granted the Securities and Exchange Commission a preliminary injunction that continued an asset freeze covering proceeds from sales of Longfin Corp. shares by three people associated with the company. The SEC described the frozen trading proceeds as exceeding $27 million.

The order mattered beyond one small public company. Longfin had become an emblem of the speculative enthusiasm surrounding businesses that attached themselves to cryptocurrency and blockchain during 2017. The court’s intervention demonstrated that conventional securities rules governing restricted shares, affiliates and public distributions still applied when a company’s market narrative centered on digital assets.

What the court ordered

Judge Denise Cote of the U.S. District Court for the Southern District of New York granted the SEC’s motion against Andy Altahawi, Suresh Tammineedi and Dorababu Penumarthi. The May 1 opinion continued a temporary restraining order, as modified on April 23, while the litigation proceeded.

The court found that the SEC was likely to prove at trial that the three defendants participated in an unregistered public distribution of Longfin stock in violation of Section 5 of the Securities Act of 1933. That was a preliminary finding based on the motion record, not a final judgment of liability. Longfin and chief executive Venkata Meenavalli remained defendants in the SEC action, but the asset freeze had been lifted as to the company and Meenavalli on April 23 at the SEC’s request.

The opinion traced the disputed transactions in detail. It found that Altahawi had sold 475,751 Longfin shares through Nasdaq by March 23, 2018 and received $25.5 million in proceeds. Separate sales attributed to Tammineedi and Penumarthi brought the total proceeds at issue above the $27 million figure used by the SEC. The relevant transactions occurred between December 15, 2017 and March 28, 2018, although the precise dates and legal theories differed among the three defendants.

The cryptocurrency connection

Longfin began trading on Nasdaq on December 13, 2017, initially at roughly $5 to $7 per share. On December 15, it announced the acquisition of Ziddu.com, which it presented as a blockchain and cryptocurrency business offering finance against warehouse receipts through digital tokens.

According to the court’s findings, Longfin closed at $22.01 on December 15—more than four times its preceding close—and reached an intraday high of $142.82 on December 18 before closing at $72.38. That closing price valued the company above $3 billion. The court also recorded that Longfin later told the SEC that Ziddu.com had no historical revenue and a carrying value of zero.

Those figures describe Longfin’s Nasdaq-listed Class A stock, not bitcoin, ether or a Ziddu token. They therefore should not be treated as cryptocurrency market prices. The record establishes temporal proximity between the acquisition announcement and Longfin’s stock surge, but it does not isolate how much of the move was caused by the announcement rather than market liquidity, speculation or other factors.

Why the boundary mattered

The May 1 order concerned the registration and resale restrictions applicable to corporate shares. It did not decide whether any cryptocurrency was itself a security, validate Ziddu.com’s business model or establish fraud. The SEC’s complaint at that stage alleged unlawful unregistered distributions, while the court determined only that the agency had demonstrated the likelihood of success required for preliminary relief.

That distinction was institutionally important in 2018. A company could describe an acquisition with blockchain terminology, but its officers, affiliates and shareholders remained subject to the established rules for issuing and reselling stock. The court’s willingness to preserve sale proceeds also showed how regulators could use conventional remedies while broader questions about digital-asset classification remained unsettled.

Limits of the May 1 record

The order preserved assets pending further proceedings; it did not determine damages, penalties or final ownership of the frozen funds. The SEC publicized the ruling on May 2, and contemporaneous reporting supplied responses from counsel, but neither changed the order’s preliminary status. This 2026 reconstruction stops at that event-day posture and does not import later judgments, delisting developments or distributions to investors into the May 1 account.