New York Court refuses to modify judgment in Longfin case
Longfin consultant Andy Altahawi tried to secure modification of the judgment because he did not previously understand the tax consequences of that judgment.
Judge Denise Cote of the New York Southern Court has nixed an attempt by one of the defendants in a lawsuit brought by the Securities and Exchange Commission (SEC) over violations concerning the sale of securities of Longfin Corporation to have a consent judgment modified.
According to Opinion & Order signed by Judge Cote on July 21, 2020, and seen by FinanceFeeds, the application of Andy Altahawi for judgment modification is denied.
On June 19, 2020, more than a year after entering a consent judgment with the SEC, defendant Andy Altahawi moved to modify that judgment pursuant to Rules 60(b)(5) and (6), Fed. R. Civ. P., because he did not previously understand the tax consequences of the judgment.
Let’s recall that, in April 2018, the SEC charged Altahawi and five co-defendants with violating Section 5 of the Securities Act of 1933 by selling securities of Longfin Corporation in violation of registration requirements of the Securities Act. In brief, the SEC charged the defendants with fraudulently conducting an initial public offering of Longfin stock purportedly using a registration exemption available under Regulation A in June through December 2017, and making a series of materially misleading statements that artificially increased the price of Longfin stock from December 2017 through March 2018, when the SEC investigation was disclosed to the public.
The SEC alleged that Altahawi sold 475,751 shares of Longfin stock in the public market between February 8, 2018 and March 23, 2018, reaping profits of over $25 million from the sale.
On June 7, 2019, a consent judgment was entered against Altahawi, holding him liable for disgorgement in the amount of $21,090,81 and $2,980,425 in civil penalties.
On June 19, 2020, Altahawi filed an instant motion with the Court requesting that the Consent Judgment be modified to add language stating this his payments to the SEC were in the form of restitution or to come into compliance with the law, rather than disgorgement, so that he may avoid paying “millions of dollars in capital gains taxes.”
Altahawi stated simply that he did not understand the tax consequences of his decision until January 2020.
The Court was unmoved by such an argument. The Judge concluded that it should come as no surprise that the finality of a judgment may not be disrupted due to a party’s alleged ignorance of the law.
“A party’s belated recognition of the consequences of his decision is not the changed circumstances envisioned by Rule 60(b)(5)”, the Judge said.
