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The NASDAQ-listed start-up company Longfin Corp, a company with roughly half-a-dozen employees in New York, made its debut in December 2017. After the Longfin announced the acquisition of the blockchain start-up , the company’s stock hyped and gave the company a market capitalization of as much as $6.2 billion. The party seems to be over and investors may be burned.

The US-Securities and Exchange Commission (SEC) alleges that Longfin violated federal securities laws. SEC halted trading with the company’s stock and has frozen roughly $27 million in trading proceeds individuals associated with Longfin had gained by unlawfully selling restricted shares to the public.

Essentially they played a shell game here and sold shares that they weren’t allowed to sell,” according to Peter Henning, Wayne State University law professor and former federal prosecutor.

The SEC claims Longfin CEO and Chairman Venkat Meenavalli issued unregistered shares to the three people so they could sell them, which they did. Consequenty, the enforcement agency is seeking penalties and disgorgement of “ill-gotten” profits under Section 5 of the Securities Act of 1933.

We acted quickly to prevent more than $27 million in alleged illicit trading profits from being transferred out of the country,” Robert Cohen, chief of the SEC Enforcement Division’s Cyber Unit said in the statement.

The Longfin stock has fallen more than 90 percent from an all-time high hit above $500 in December 2017.

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