Longfin, a Reg A+ issuer that saw its shares trade on the Nasdaq only to later implode, has generated some more collateral damage as an audit firm providing services to the firm has been penalized by the Securities and Exchange Commission (SEC).
Back in 2020, Longfin – an erstwhile blockchain firm, listed its shares on the Nasdaq at $5/each only to see the share value rocket to over $140 a share in short order. The initial crypto euphoria was soon joined by the company’s demise as allegations of fraud compelled the firm and its CEO to settle charges with the SEC.
According to the SEC, CohnReznick LLP has been charged with improper professional conduct on engagements for “violating numerous professional standards.” The case involving Longfin was rolled in with another case involving Sequential Brands that also involved the audit firm.
As to the Longfin audit, the order finds that CohnReznick and its national office failed to address known issues involving related party transactions, which were used by Longfin to fraudulently inflate its revenues.
The SEC states that without admitting or denying the findings, CohnReznick agreed to pay a $1.9 million penalty, to be censured, and to implement undertakings to retain an independent consultant to review and evaluate certain of its audit, review, and quality control policies and procedures, as well as to abide by certain restrictions on retaining new audit clients during the consultant’s review. This is inclusive of both cases.