Bitcoin Mania Made Longfin a $6.2 Billion Company. Now Under SEC Scrutiny, Traders Can’t Get Out of It

On the back of the Bitcoin craze, investors couldn’t seem to get their hands off a so-called blockchain company with roughly half-a-dozen employees in New York—Longfin. After its debut in December, the company was bestowed a valuation of as much as $ 6.2 billion.

Now, on Friday, investors can’t get out of the company, even as the Securities and Exchange Commission (SEC) alleges that the Nasdaq-traded company violated federal securities laws. According to the commission, it has frozen roughly $ 27 million in trading proceeds individuals associated with Longfin had gained by unlawfully selling restricted shares to the public.

“We acted quickly to prevent more than $ 27 million in alleged illicit trading profits from being transferred out of the country,” said Robert Cohen, chief of the SEC Enforcement Division’s Cyber Unit, in a statement. “Preventing defendants from transferring this money offshore will ensure that these funds remain available as the case continues.”

Investors, however, have not been able to react yet to the SEC’s filing. That’s because about 30 minutes ahead of the SEC’s announcement, the Nasdaq halted trading of the company’s stock under the code “T12″—a halt that requires additional information from the company.

Thus, at first blush, Longfin shares appeared up 47% for the day, giving the company a valuation of about $ 2 billion. But that uptick is something of a time capsule—capturing sentiment from a Wednesday CNBC interview with LongFin’s CEO Ventaka Meenavalli, in which the executive defended his company and blamed short sellers for his stock’s fall.

Still, it will be a bumpy ride for investors who have bet on and bet against the firm. Halts either last minutes or much longer.

“T12s can last anywhere from a few hours to a few weeks or even months,” says a day trader Max of MadazMoney (he wouldn’t provide his full name). “There’s no definitive timeframe to these, which answers your question why it’s the halt from hell. People could have their funds stuck for an indefinite amount of time.”

Longfin did not respond to immediate requests for comment.