US prosecutors said on Wednesday the former chief executive of Longfin Corp has been indicted for engineering an accounting fraud that inflated the revenue of the now-defunct cryptocurrency company by more than $66 million.

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The securities fraud charge against Venkata Meenavalli, 49, of India, was announced 18 months after Longfinshares went on a roller-coaster ride as cryptocurrencies were coming into fashion, rising more than 13-fold over a few days and briefly making the company worth more than $3 billion.

Prosecutors said Meenavalli generated fraudulent documents that caused Longfin to report as revenue millions of dollars of commodities "transactions" that were actually "sham, round-trip events" between the company and entities he controlled.

US Attorney Craig Carpenito in New Jersey said the more than $66 million of revenue should never have been recognised and made Longfin shares look more attractive to investors.

Longfin, which was based in New York and had offices in Lyndhurst, New Jersey, shut down last November.

Meenavalli could not immediately be reached for comment, and a lawyer for him could not immediately be identified.

A default judgment was entered in January against Meenavalli in a related US Securities and Exchange Commission civil case filed in April 2018 against him, Longfin and three associates.

In that case, the SEC won a court order freezing $27 million of trading proceeds after accusing Veenamalli of arranging the issuance of Longfin shares to Andy Altahawi, Dorababu Penumarthi and Suresh Tammineedi, which were sold after the stock soared.

The SEC said those three defendants agreed to settle.

It said Altahawi will pay a $2.9 million fine, return $21 million of alleged wrongful gains, and accept a five-year public company officer and director ban, and Penumarthi and Tammineedi will pay more than $1.7 million and $241,000, respectively. None of those defendants admitted or denied wrongdoing.

First Published:Jun 6, 2019 11:05 AM IST